Obamacare’s Biggest Legal Threat

by John Fund
In Halbig, the courts may finally force Obama to work with Congress if he wants to rewrite the law.

The legal positions of President Obama’s Justice Department have been slapped down unanimously a remarkable 13 times in the Supreme Court in the last two years. Over and over, even Obama’s own two appointees to the court — Sonia Sotomayor and Elena Kagan — have held that the president has exceeded his authority and violated the separation of powers. This coming week, we could see the second-highest court in the land rule that the administration broke the law in enforcing a key provision of Obamacare, calling into question once again Obama’s fidelity to the Constitution — and further endangering his signature program.

The case of Halbig v. Sebelius (since renamed Halbig v. Burwell, for the current HHS secretary) was argued before a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit Court in March. It attacks the central nervous system of Obamacare — the government exchanges that were set up to subsidize health insurance for low-income consumers. If the Supreme Court ultimately finds that the Obama administration violated the law in doling out those subsidies, it could force a wholesale revision of Obamacare. In January, The Hill quoted a key Obamacare supporter as saying that Halbig was “probably the most significant existential threat to the Affordable Care Act.” Jonathan Turley, a noted liberal constitutional-law expert at George Washington Law School, recently agreed, writing in the Los Angeles Times that Halbig “could leave Obamacare on life support.”

President Obama has increasingly exasperated both judges and constitutional scholars with his boasts about going around Congress when it doesn’t give him what he wants. “I’ve got a pen, and I’ve got a phone,” he told reporters before his first Cabinet meeting of 2014, in January. That attitude has prompted his decision to rewrite Obamacare at least 23 times without any involvement of Congress. If Obama’s actions in Halbig are found unconstitutional, in which he imposed taxes no Congress ever authorized, then other parts of Obamacare will become more vulnerable to legal challenge, and Congress will probably have a much bigger say in rewriting or reversing aspects of the law.

After all, even Obama has conceded that Obamacare is, to put it politely, rough-hewn. “Obviously we didn’t do a good enough job in terms of how we crafted the law,” he told NBC’s Chuck Todd in November 2013. A prime example? Obamacare established an insurance exchange for each state and authorized the federal government to operate the exchanges in states that chose not to set up their own. But Obamacare’s authors wanted to create strong incentives for states to set up their own health-insurance exchanges — they mandated penalties for states that opted out. In addition, because Obamacare needed the support of every single Democratic senator (plus the two independents in the 2009 Senate), the law’s supporters were forced to accommodate the demands of key fence-sitters. One such was Ben Nelson, then a Democratic senator from Nebraska, who was concerned about excessive federal control of the exchanges. To gain Nelson’s support, the law specified that subsidies for Obamacare could only go through “an Exchange established by the State.” To the surprise of most, over two-thirds of the states declined to establish their own exchanges.

The Halbig plaintiffs — individuals and small businesses in six states that didn’t establish state exchanges — argue that the Obama administration is breaking the law by offering those tax subsidies in all 50 states. The plaintiffs argue that if the subsidies hadn’t been offered in their states, they would have been exempted from the individual-mandate penalties of Obamacare because they couldn’t have afforded to pay for health coverage.

The Justice Department has responded that the argument is all about a drafting error and insists that Congress actually intended the subsidies to be available to all. The Internal Revenue Service issued a single-paragraph explanation of its decision to ignore the “established by a State” language of Obamacare, though this restrictive language appears nine times in the law’s text. Nonetheless, Judge Paul Friedman of the district court in Washington, D.C., upheld the administration’s interpretation in January, allowing the subsidies to continue in all states. But Turley predicts that “the D.C. Circuit Court may see things quite differently,” given the now-established Obama record of executive overreach that the Supreme Court has documented and repeatedly rebuked.

Jonathan Adler, a professor of law at Case Western University who has argued on behalf of the Halbig plaintiffs, has also compiled several recent examples of the Supreme Court’s impatience with poorly drafted legislation. In Michigan v. Bay Mills Indian Community, for example, Justice Elena Kagan noted: “This court does not revise legislation . . . just because the text as written creates an apparent anomaly as to some subject it does not address.” In Utility Air Regulatory Group v. EPA, Justice Antonin Scalia, writing for the majority, stressed that “an agency has no power to tailor legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.”

What would happen if, in 34 states, the subsidies that are flowing through the insurance exchanges set up by the federal government were suddenly declared unconstitutional by the courts? Mass chaos, as predicted by Obamacare defenders? Not likely. Instead, some states would move to set up their own exchanges, perhaps benefiting from the lessons of Obamacare’s shaky rollout. But more important, the Obama administration would have no choice but to work with Congress as it revisited the exchange issue and rewrote the law. With that kind of leverage, we could see a Republican House — possibly joined by a Republican Senate after January 2015 — that is at last able to force substantial changes in Obamacare despite the president’s obstinancy. A favorable ruling in Halbig by the Supreme Court might be just the two-by-four needed to get President Obama’s attention and make him realize that his pen has run out of enforcement ink.

— John Fund is national-affairs correspondent for NRO.

Did you like this?