In Halbig v. Burwell, the D.C. Circuit Court of Appeals held that under the Affordable Care Act federal health insurance subsidies are available for policies purchased only on state exchanges and not those purchased on the federal exchange.
If the Supreme Court takes the case, it will also have a rich opportunity to slap down the out-of-control, politicized Internal Revenue Service. Under this administration, the IRS has behaved as though it were a super-legislature with authority not just to promulgate regulations beyond its narrowly prescribed statutory power, but also to change laws wholesale in order to serve the administration's policy ends.
A proper wrist slapping of the IRS might well send a long overdue message to all federal administrative agencies -- take the renegade EPA, for example -- that they don't have carte blanche to do whatever they decide to do.
The ACA provides for the establishment of state exchanges through which consumers can purchase health insurance. The law did not make the establishment of such exchanges mandatory, and only 14 of the 50 states did so.
The law, in a separate section, also provides for the establishment of a federal exchange through which consumers can purchase health insurance in the event their state opts not to establish an exchange.
That's just half the story. President Obama and his Obamacare architects wanted subsidies (in the form of tax credits) to be provided to people who purchase Obamacare policies. The subsidies would shift the cost of the policy from the individual to the government -- thus, the proverbial "free health care."
Here's where it gets tricky. The law says the "subsidy" is available only for policies purchased through the state exchanges and not the federal exchange. Honest readers of the law and of the political considerations behind the relevant provisions must concede that the law was carefully drafted with this distinction in mind. There was a deliberate intent to make the subsidies available only for purchases through the state exchanges.
There are two salient sets of facts that make this clear. The first is the unambiguous statutory language. The law provides for subsidies to those who purchase policies from an "exchange established by the state." There is no mistaking the plain meaning of those words.
Moreover, despite multiple sections and subsections dealing with these subsidies, there is no hint that Congress intended to have them apply to policies purchased from the federal exchange.
Legally, the question should end there because it is a generally recognized rule of statutory interpretation that statutes shall first be interpreted according to the plain meaning of the statutory language. Unfortunately for the administration, if you go further and apply other rules of statutory interpretation, such as that a statute should be read as a harmonious whole, you get the same result.
There is another interpretive rule with which all statutory draftsmen and contract lawyers are intimately familiar. If the statute or a contract specifically includes language in one section but omits it in another, it is presumed to have done so intentionally.
For example, if I draft a contract to provide that the company will reimburse my client for airplane travel expenses and mention no other type of travel, I understand that my client will not be reimbursed for automobile or train travel. When Congress expressly provided for subsidies for state exchange policies and did not include such a provision for federal exchange policies - even though there were separate sections covering the federal exchange -- it is presumed they meant that the government would not subsidize federal exchange policies.
The second salient fact is that if we examine congressional intent beyond the words of the statute we will find that the too-clever-by-half Obama administration had a specific reason not to subsidize policies purchased through the federal exchange. They wanted to use financial coercion to incentivize states to set up exchanges.
Again, unhappily for the administration, it used this exact kind of coercion with Medicaid under the statute, providing that states that don't adopt the law's standards for Medicaid eligibility will be denied federal Medicaid funding. Even worse, we have "smoking gun" evidence from one of the administration's Obamacare gurus, Jonathan Gruber, who stated that if a state doesn't set up an exchange, its citizens won't get their tax credits.
But when 36 states thumbed their noses at Obamacare by not establishing exchanges, the autocratic IRS, on its own initiative, issued a regulation in August 2011 making the subsidies apply to policies purchased on federal exchanges.
The Supreme Court must reaffirm its commitment to the Constitution and the rule of law by affirming Halbig, making a firm statement that the law is not merely a tool for ideologically obsessed statists to twist at their capricious discretion to achieve their political ends.