As the Supreme Court considers whether the Obama administration can force Hobby Lobby to buy morning-after pills under the Affordable Care Act, the very architecture of that law is on trial one mile away at the U.S. Court of Appeals for the District of Columbia. The question is nominally one of a technical issue in the Affordable Care Act but is more deeply one of the nature of the presidency: Is the president bound by law, or can he unilaterally overrule Congress when he deems it prudent?
Will we be governed under law, or under presidential decree?
The Affordable Care Act authorizes the federal government to offer subsidies and tax credits for the purchase of health insurance through the so-called exchanges created by the states under the law. The architects of Obamacare, having richly larded the bill with a variety of financial inducements, expected that every state would create an exchange and thereby make its residents eligible for those subsidies and tax credits. The great majority of the states, 34 of them, in fact, said, “No.” So the federal government stepped in, as the law empowers it to do, and set up its own exchanges in those states that declined to create their own. The problem, which the Democrats might have anticipated if they’d bothered reading the law before passing it, is that the Affordable Care Act distinguishes between those exchanges created by the states and those created by the federal government, and it authorizes tax credits and subsidies only for state-created exchanges, helpfully identified in the text of the law as exchanges created by one of the fifty states or the District of Columbia. On top of that, a key feature of Obamacare’s complex architecture is that employers and certain individuals are subject to penalties only if those tax credits are available.
This created both a policy problem and a political problem for the Democrats: Without the subsidies and punitive taxes, those 34 federally created exchanges will collapse. At unsubsidized rates, premiums will exceed 8 percent of income for practically all of the residents of states receiving subsidies through the federal exchanges — which the Affordable Care Act defines as “unaffordable” — triggering exemptions from the individual mandate to purchase insurance. Which is to say, Obamacare would lose its power to bribe and its power to coerce simultaneously.
So the Obama administration has ordered its health-care enforcers at the IRS to ignore the law and offer the subsidies and credits through the federal exchanges as well. The IRS has no legal authority to do so, and Congress has appropriated no funds for the purpose of underwriting those subsidies. The president is ordering agents of the federal government to violate the law.
The text of the Affordable Care Act repeatedly distinguishes between state-created exchanges and federally created exchanges; the two kinds of exchanges are in fact created in entirely separate sections of the law, Section 1311 for the state exchanges and Section 1321 for the federal exchanges. The law authorizes tax credits and subsidies “through an Exchange established by the State under 1311.” It authorizes none for those created under 1321. This was by design: The authors of the law wanted the states rather than the federal government to create exchanges, partly for political purposes and partly for policy purposes. It is not an oversight that there is no authorization of subsidies for the federal exchanges — the law is designed that way intentionally, which is why the qualifier “established by the state” appears repeatedly throughout its discussion of subsidies and tax credits.
Those who have been seeking to force the Obama administration to follow the law have had a rough go of it in the courts, with Judge Paul Friedman of the U.S. District Court for the District of Columbia exercising maximum judicial imagination to uphold the president’s distilling out of thin air new broad powers for the IRS authorized by no law. Judge Friedman’s legal reasoning is faulty, in no small part because, as Jonathan Adler notes at the Volokh Conspiracy, he “seemed not to understand how the PPACA became law.” Among other things, the judge cites House legislation in support of the Obama administration’s case, but the ACA was a Senate creation, and the House legislation was never merged with the Senate bill and therefore never became law. The Senate bill was famously passed through the reconciliation process with limited amendments and is a very different sort of law from what the House bill was.
President Obama is no doubt disappointed and exasperated by the obduracy of the majority of the states in refusing to go along with his signature health-care program. He should remind himself, or be bluntly reminded, that we write down our laws for a reason, that reason being that the rule of law has proved itself infinitely preferable to arbitrary big-man government. Barack Obama was elected and he was reelected, but he has not yet been offered coronation, and is therefore obliged to follow the law like the rest of us — even a law so deformed, unfinished, and sent before its time into this breathing world scarce half made-up as the Affordable Care Act.
As somebody once said: “It’s the law.”