Federal Judge Strikes Down Subsidies For Federal Obamacare Exchanges
A legal setback for the Affordable Care Act, but the important arguments on this issue lie in higher courts.
A Federal District Court Judge in Oklahoma has ruled that, because of the way that the relevant part of the Affordable Care Act was written, Americans who purchase health insurance through the Federal exchange established under the law in states that did not set up state exchanges cannot receive the tax subsidies meant to keep their premiums low:
Deepening the controversy over tax subsidies to help lower-income workers obtain health insurance, a federal trial judge in Oklahoma on Tuesday barred those credits for individuals who shop for coverage on marketplaces run by the federal government, not by a state.
That issue is already awaiting the Supreme Court’s attention, with the federal government due to file there on Friday a defense of the subsidies scheme that has so far helped nearly five million individuals to afford health coverage under the Affordable Care Act. (That case is King v. Burwell.)
In Oklahoma, U.S. District Judge Ronald A. White of Muskogee became the latest to rule on the dispute. For the time being, his is the only ruling still in effect that would strike down the federal marketplace tax credits (and it is subject to appeal).
That was the same result reached by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit, but that decision has been set aside because of reconsideration by the en banc D.C. Circuit. A hearing is set in that case for December 17. The subsidies for individuals obtaining insurance on federally run exchanges were upheld by the U.S. Court of Appeals for the Fourth Circuit in the King v. Burwell case.
Meanwhile, a federal trial judge in Indianapolis, William T. Lawrence, is scheduled to hold a hearing a week from Thursday on a challenge by Indiana and thirty-nine public school districts in that state, seeking to block subsidies for those buying insurance on an exchange that is run by the federal government. (In August, Judge Lawrence rejected a federal government request to dismiss that challenge; both sides have now filed motions for summary judgment — that is, rulings their way, without a full trial with witnesses.)
In Judge White’s ruling Tuesday upholding Oklahoma’s challenge to tax credits for the exchange in that state, he relied on what he found to be the clear language of the ACA on that point — that is, subsidies are only to be available on an exchange “established by the state.” It was not his option, the judge said, to read the entire health care law to find reasons to make sure that the subsidy system worked in all exchanges across the country, federal and state.
Congress did not define what it meant by an exchange “established by the state.” However, the Internal Revenue Service has issued a ruling saying that this means any exchange set up in a state, no matter who is running it. Rejecting that interpretation, Judge White said that “vague notions of a statute’s basic purpose are nonetheless inadequate to overcome the words of its text regarding the specific issue under consideration.”
If Congress in the ACA did not mean to confine subsidies to exchanges only if they are run by the states, it is free to amend the law, the judge wrote.
Think Progress’s Ian Millhiser is, not surprisingly, deeply critical of the decision:
One thing that immediately stands out in White’s opinion is just how thin his legal reasoning is. Despite the fact that this case concerns a matter of life and death for the millions of Americans he orders uninsured, his actual discussion of the merits of this case comprises less than 7 double-spaced pages of his opinion. In that brief analysis he quotes the two other Republican judges who ordered Obamacare defunded, claiming that “the government offers no textual basis” in the Affordable Care Act itself for treating federally-run exchanges the same as those run by states. In fact, the government has identified numerous provisions of the law which cut against the argument that only some exchanges should provide subsidies.
Even more significantly, White’s opinion does not at any point acknowledge the legal standard that applies when a statute contains language that is at odds with other provisions of the law. As the Supreme Court explained in 2007, “a reviewing court should not confine itself to examining a particular statutory provision in isolation” as the “meaning—or ambiguity—of certain words or phrases may only become evident when placed in context.” White, by contrast, relies entirely a passage that supports the plaintiffs’ arguments while ignoring the much more prevalent statutory language that supports the government’s argument.
Towards the end of his opinion, White claims that the reading he gives to the Affordable Care Act — a reading which assumes that the lawmakers who enacted this politically contentious law intended to give every Republican governor in the country the power to blow up one of its central functions in their state — is not “absurd” because “it could reflect the sort of compromise that attends legislative endeavor.” Yet the only evidence he provides that Congress may have intended to “compromise” by giving Rick Perry the power to destroy Obamacare in Texas is a now-infamous quote by Professor Jonathan Gruber. Gruber is an economist who consulted with Congress in designing the law. In 2012, nearly two years after the Affordable Care Act became law, Gruber was recorded giving a talk where he said that “if you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits.”
Millhiser’s characterization of the opinion is, I think, unfairly dismissive. Right or wrong, Judge White’s decision does not come out of left (or right) field at all, but is instead a fairly straightforward application of one theory about how statutes, and agency interpretations of those statutes, should be viewed in this situation, as the conclusion to his opinion lays out clearly:
The court is aware that the stakes are higher in the case at bar than they might be in another case. The issue of consequences has been touched upon in the previous decisions discussed. Speaking of its decision to vacate the IRS Rule, the majority inHalbig stated ”[w]e reach this conclusion, frankly, with reluctance.” 758 F.3d at 412.
Other judges in similar litigation have cast the plaintiffs’ argument in apocalyptic language. The first sentence of Judge Edwards’ dissent in Halbig is as follows: “This case is about Appellants’ not-so-veiled attempt to gut the Patient Protection and Affordable Care Act (‘ACA’).” 758 F.3d at 412-13. Concurring in King, Judge Davis states that “[a]ppellants’ approach would effectively destroy the statute . . . .” 759 F.3d 358, 379 (Davis, J., concurring). Further, “[w]hat [appellants] may not do is rely on our help to deny to millions of Americans desperately-needed health insurance. . . ..” Id.
Of course, a proper legal decision is not a matter of the court “helping” one side or the other. A lawsuit challenging a federal regulation is a commonplace occurrence in this country, not an affront to judicial dignity. A higher-profile case results in greater scrutiny of the decision, which is understandable and appropriate. “[H]igh as those stakes are, the principle of legislative supremacy that guides us is higher still. . . This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed life-tenured judges.” Halbig, 758 F.3d at 412.
This is a case of statutory interpretation. “The text is what it is, no matter which side benefits.” Bormes v. United States, 759 F.3d 793, 798 (7 Cir.2014). Such th a case (even if affirmed on the inevitable appeal) does not “gut” or “destroy” anything. On the contrary, the court is upholding the Act as written. Congress is free to amend the ACA to provide for tax credits in both state and federal exchanges, if that is the legislative will. As the Act presently stands, “vague notions of a statute’s ‘basic purpose’ are nonetheless inadequate to overcome the words of its text regarding the specific issue under consideration.”Mertens v. Hewitt Assocs., 508 U.S. 248, 261 (1993) (emphasis in original). It is a “core administrative-law principle that an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.” Util. Air Regulatory Group v. EPA, 134 S.Ct. 2427, 2446 (2014). “But in the last analysis, these always-fascinating policy discussions are beside the point. The role of this Court is to apply the statute as it is written – even if we think some other approach might ‘accor[d] with good policy.'” Burrage v. United States, 134 S.Ct. 881, 892 (2014)(quoting Commissioner v. Lundy, 516 U.S. 235, 252 (1996)(other citation omitted)). See also Michigan v. Bay Mills Indian Community, 134 S.Ct. 2024, 2034
(2014)(“This Court has no roving license, in even ordinary cases of statutory interpretation, to disregard clear language simply on the view that . . . Congress ‘must have intended’ something broader.”); Util. Air Regulatory Group v. EPA, 134 S.Ct. 2427, 2446 (2014)(“The power of executing the laws necessarily includes both authority and responsibility to resolve some questions left open by Congress that arise during the law’s administration. But it does not include a power to revise clear statutory terms that turn out not to work in practice.”).
The animating principles of this court’s decision have been articulated by the Tenth Circuit: “[C]ourts, out of respect for their limited role in tripartite government, should not try to rewrite legislative compromises to create a more coherent, more rational statute. A statute is not ‘absurd’ if it could reflect the sort of compromise that attends legislative endeavor.” Robbins v. Chronister, 435 F.3d 1238, 1243 (10th Cir. 2006). “An agency’s rulemaking power is not ‘the power to make law,’ it is only the ‘power to adopt regulations to carry into effect the will of Congress as expressed by the statute.'” Sundance Associates, 139 F3d at 808 (citation omitted) “In reviewing statutes, courts do not assume the language is imprecise … Rather, we assume that in drafting legislation, Congress says what it means.” Id at 809.
The court holds that the IRS Rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law, pursuant to 5 U.S.C. §706(2)(A), in excess of statutory jurisdiction, authority, or limitations, or short of statutory right, pursuant to 5 U.S.C. §706(2)(C), or otherwise is an invalid implementation of the ACA, and is hereby vacated.
As I’ve noted when I’ve written about this issue in the past, this issue involves a question of statutory interpretation and Congressional intent when it passed the Affordable Care Act. At issue is the provision of the law which authorizes the tax subsidies that many people qualify for under the law. By it’s plain language, that section appears to limit subsidies only to policies that are purchased on state exchanges, while not appearing on the face of the statute to address at all the question of what happens to people who purchase their insurance through the Federal exchange that covers the 38 states that did not set up their own state exchange. Opponents of the law have argued that, because the statute does not explicitly state that the tax subsidies are available to policies purchased in the Federal exchange, then the I.R.S. rule that effectively interprets the statute in that manner is invalid. In the cases that have made their way through the Federal Court on this issue, the Government has argued that this interpretation of the statute would blunt the clear intent of Congress to provide tax subsidies to people purchasing health insurance through the exchanges based on their income level. On that issue, the question of which side is correct comes down to statutory interpretation, in which the Courts are generally supposed to be guided by the plain language of the statute, the presumption that the law means what it says and that statute is both consistent with itself and with other laws passed by Congress, and by the intent of Congress as expressed in the law. The question in this case, ultimately, is whether the agency’s interpretation of the statute, which at least on its face appears to grant authority not specifically granted by the statute is permissible given those standards.
Today’s decision is likely to have limited impact in the real world, at least initially. As Denniston notes above, two Federal Circuit Courts of Appeal have already ruled on this matter. In decisions that were handed down on the same day in July. In one case, a panel of the D.C. Circuit Court of Appeals ruled that the subsidies could not be applied to policies purchased on the Federal exchange while another panel from the Fourth Circuit Court of Appeals rejected the Plaintiffs arguments in the case before them. The Fourth Circuit case has already been appealed to the Supreme Court and, at least theoretically be heard this term. The Justices are unlikely to act on the matter any time soon, though, because the full D.C. Circuit has accepted the case in that court for en banc review, with a hearing scheduling for early December. Since that action vacated the panel decision, there is no longer a Circuit split at this point, the urgency for the Court to accept the Fourth Circuit Appeal is not as apparent, although it’s still possible that they could do so. More likely than not, though, the Justices will hold onto the appeal before them until the D.C. Circuit has ruled, not the least because whatever decision they issue will ultimately be appeal to the Supreme Court as well. If, as many observers expect, the D.C. Circuit rules contrary to its panel’s decision then there would be no Circuit split and that may be enough for the Justices to decline to hear the appeals at all. This case, in the meantime, will be appealed to the 10th Circuit but it is likely to be many months before oral argument is heard in that case, and a decision may not be handed down until it is past the time for the Supreme Court to hear any appeal this term. In the end, the Justices may decide to accept the case because of the important issues of Federal law that are involved, but absent a Circuit split they would at least have a reason to decline to wander into the Obamacare jungle for the third time in three years.
Here’s the opinion: