The challenge was initially written off by some as a fool’s errand because there’s a lack of evidence that the Democrats who crafted and passed the Affordable Care Act intended to block subsidies on the federal exchange, which was designed as a backstop on behalf of the states. (They’ve signed a brief saying as much.) But the challengers seized on an ambiguity in the language of the statute which says the subsidies are to be provided by “an Exchange established by the State.”
I recall the crafting of ACA vividly. The Feds could not DEMAND that States create exchanges per a Supreme Court ruling, so the ACA authors came up with a carrot and some sticks to force them to anyway.
The carrot was that the Feds would pay for the cost of the expanded Medicaid for the first 3 years for States that created an exchange (Wheee ... which States would turn down free money?)
The “Sticks” were: if a State did not create an exchange, the Feds would not pay the Obamacare subsidies for residents in that State (thus hurting the employees in that State); and the Feds would withdraw ALL Medicaid funding for that State.
An early lawsuit by a State led to the Supreme Court ruling that the Feds could NOT cut off all Medicaid funding if the State did not create an exchange (i.e., the Supremes broke this stick).
States then began evaluating whether it was in their best interest to create an Exchange or not, because the big stick of withdrawing medicaid funding was broken. Eventually 36 States decided that they were better off not expanding medicaid, and decided against creating an Exchange.
The Democrats were then backed into a corner — they couldn’t allow 36 States to not have Obamacare subsidies; so they changed their tune and said that they really really didn’t mean that there would be no subsidies for States covered by the Federal Exchange, even though the ACA said so explicitly.
HHS was then presented with a problem — they had to build an Exchange to cover the residents of 36 States plus DC, and this resulted in the Obamacare Website fiasco (had States created their own exchanges, the HHS website for DC only would have been a much smaller problem - fewer people signing up, coverage only for DC, not a variant for each of 36 States).
The IRS was then tasked to create a rule which penalized employers in 36 States without State Exchanges if any of their employees accepted an Obamacare subsidy. Hence the lawsuit — how can the IRS have a rule that gives subsidies to employees in a State without a State Exchange (and thus penalizes the employer) when the law in plain English says subsidies will only be given to employees in States which have created a State Exchange.
Having stayed at the Holiday Inn Express last night, my legal opinion is that legally this is cut and dried: the IRS Rule (regulation) explicitly contradicts the plain language of the law itself. Without the IRS rule, there is no enforcement, and the States can tell HHS to go fly a kite. We will see tomorrow whether the Federal Judges agree with me.
If you want to have fun, go to SCOTUSBlog and look at how Obama’s lawyer tied himself into knots trying to argue that the plain language of ACA doesn’t mean what it says (”Are you going to believe me, or your lying eyes?”)
Thanks for the informative post.
Finally, they have a living breathing law.