Tuesday, July 22, 2014

DC Circuit Strikes Makes Obamacare Optional for States in Halbig

   The DC Circuit just decided 2-1 against the Government in Halbig, the Obamacare case about whether “an Exchange established by the State under section 1311” means an exchange established by the state or means any exchange operating in that state, even if it was established by the Federal government because the State refuses to establish one. This matters because the statute says that the government can only impose the individual mandate and give subsidies after such an exchange is established. Otherwise, it can set up a Federal exchange, but can’t herd people into it by either force or subsidies.

The Government makes the argument that the phrase “established by the State” is ambiguous, so the Government can ignore it. It’s fine to look beyond one particular use of a term to see if the term is used in a contradictory way elsewhere in a statute, but the idea that the phrase is ambiguous just looks sillier and sillier the more the Government brings up other parts of the statute. The Government’s main argument, though, is that the ACA was drafted stupidly, and if the Courts don’t fix it up, it will collapse financially. Since the statute as written is such a stupid way to structure health insurance, the Government argues, Congress couldn’t possibly have intended to enact such a law, and the Courts should rewrite the law to achieve what Congress had in mind.

 Some observations: 

1. The difference between conservative and liberal judges is summed up by what the conservative majority says at the end of its opinion and the liberal minority says at the start of its dissent:

[A]lthough our decision has major consequences, our role is quite limited: deciding whether the IRS Rule is a permissible reading of the ACA.

vs.

This case is about Appellants’ not-so-veiled attempt to gut the Patient Protection and Affordable Care Act (“ACA”).

     That is: is the role of the court process to make sure the government follows the law, or is it to defend good policies and defeat bad policies?

2. In another context, the Administration has explicitly adopted the position that the individual mandate is unnecessary for the purposes of the rest of Obamacare, completely undercutting its position in Halbig that the mandate is crucial. That is with respect to the Northern Marianas. Shouldn’t the Administration be estopped from switching its legal position?

Yet the supposedly unthinkable scenario the government and dissent describe—one in which insurers in states with federal Exchanges remain subject to the community rating and guaranteed issue requirements but lack a broad base of healthy customers to stabilize prices and avoid adverse selection—is exactly what the ACA enacts in such federal territories as the Northern Mariana Islands, where the Act imposes guaranteed issue and community rating requirements without an individual mandate….This combination, predictably, has thrown individual insurance markets in the territories into turmoil. … But HHS has nevertheless refused to exempt the territories from the guaranteed issue and community rating requirements, recognizing that, “[h]owever meritorious” the reasons for doing so might be, “HHS is not authorized to choose which provisions of the [ACA] might apply to the territories.”… The CLASS Act and the provisions applicable to the territories attest that Congress twice did exactly what the government and the dissent insist it never would: introduce significant adverse selection risk to insurance markets.

The dissent gives a feeble explanation for why the Administration is NOT estopped from arguing that the mandate is essential on the mainland but inessential in the islands—basically, that Congress doesn’t care about messing up the lives of people in unimportant places like the Northern Marianas:

Congress’ intentional omissions in these peripheral insurance markets of a tool it knew to be important to preventing adverse selection merely indicates that Congress had a substantially higher tolerance for the risk of adverse selection in such markets vis-à-vis the core markets where it did impose the individual mandate.

3. I hadn’t heard of this argument before. Apparently the ACA in 42 U.S.C. § 18043(a) actually makes a precise distinction in saying that certain federal exchanges---territorial ones--- would be treated as state exchanges for the purposes of the Act.

     [T]he government offers no textual basis—in sections 1311 and 1321 or elsewhere—for concluding that a federally established Exchange is, in fact or legal fiction, established by a state. Moreover, as we have noted, that absence is especially glaring given that the ACA elsewhere provides that a federal territory that establishes an Exchange “shall be treated as a State,” 42 U.S.C. § 18043(a), clearly demonstrating that Congress knew how to deem a non-state entity to be a “State.” Thus, at least in light of sections 1311 and 1321, the meaning of section 36B appears plain: a federal Exchange is not an “Exchange established by the State.” 

4. If we accept the argument that the Courts should rewrite stupid laws, I’d like the Court to go even further and strike down Obamacare completely, because Congress couldn’t have intended to mess up the country that way. Government health care is a rotten idea, so how could Congress have decided to enact it? In fact, the Courts should strike down all of the dozens--- hundreds, in fact--- of federal laws that are self-defeating and make the country worse off. Or, more mildly, stick to Obamacare and do what is normal judicial practice when one part of a law is unconstitutional but essential to a law’s purpose (and the law lacks a severability clause): strike down the entire law and tell Congress to start over.

5. I’ll write a separate post about penalty clauses, a game theory idea important to Halbig.

http://lawprofessors.typepad.com/law_econ/2014/07/dc-circuit-strikes-makes-obamacare-optional-for-states-in-halbig.html

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