How Two Republican Judges Could Blow Up Obamacare Tomorrow


At 9:30am on Tuesday, thirty minutes before the Supreme Court convenes to decide the closely watched Hobby Lobby case, three lesser known judges will hear a last ditch effort to blow up the Affordable Care Act masterminded by a conservative law professor and a staffer at one of the nation’s leading conservative think tanks.

The lawsuit is unlikely to win. Then again, legal scholars from across the political spectrum said the same thing about the first round of lawsuits seeking to undermine the Affordable Care Act, and the Supreme Court came within a hair of embracing the legal theory behind that lawsuit. As two of the three judges hearing Tuesday’s case are Republicans, there is no guarantee that the panel will turn down this opportunity to carve a hole in President Obama’s leading accomplishment.

The Affordable Care Act gives states the option to either run their own health care exchange or to allow the federal government to run an exchange for them. The theory behind Halbig v. Sebelius is that residents of the 34 states who took the second option are not allowed to receive subsidies that are intended to enable them to pay for health insurance. Should the plaintiffs succeed, an estimated 6.5 million fewer people will obtain health coverage by 2016, and many of those who do obtain it will have to pay much more to do so.

The legal arguments in this case are almost nauseating in their complexity, but they more or less boil down to this: the plaintiffs identified two places in the Affordable Care Act’s text which, if taken out of context, suggest that Congress did not intend federally-run exchanges to offer subsidies. Specifically, they note two places which seem to tie the subsidies to “an Exchange established by the State.” Indeed, as a federal trial court that rejected their arguments acknowledges, this language when “viewed in isolation, appear to support plaintiffs’ interpretation.”

Courts however, do not read one short phrase in isolation when interpreting a statute. Rather, as the Supreme Court has repeatedly explained, “a reviewing court should not confine itself to examining a particular statutory provision in isolation. . . . The meaning — or ambiguity — of certain words or phrases may only become evident when placed in context.”

When the plaintiffs’ arguments are compared to the language of the Affordable Care Act as a whole, it is clear that they fail. One provision, for example, indicates that any “exchange” shall be an “entity that is established by a State” — language which indicates that federally run exchanges will be deemed to be “established by a state” even if this seems counter-intuitive. Another provision provides that, when a state elects not to run an exchange, the Secretary of Health and Human Services “shall . . . establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.” Thus, the law not only authorizes the Secretary to stand in the state’s shoes when it runs an exchange, it also empowers her to implement the law’s “other requirements.”

Nor is this the extent of the problems with the plaintiffs’ arguments. As the lower court judge who rejected this lawsuit explains, the plaintiffs’ theory of the law, if applied to another section of the Affordable Care Act, would prohibit anyone whatsoever from buying insurance on the federally run exchanges. This interpretation makes no sense, for the basic reason that “courts presume that Congress has used its scarce legislative time to enact statutes that have some legal consequence.”

All of this is a long-winded way of saying that the Halbig plaintiffs should lose — and this isn’t even an exhaustive discussion of the problems with their argument. Even if the plaintiffs’ were able to offer a plausible reading of the law that supports their theory, that is not enough. The Supreme Court has long held that courts should defer to a federal agency’s interpretation of a law so long as “the agency’s answer is based on a permissible construction of the statute.”

Yet, while the plaintiffs don’t have the law on their side, they do have two Republicans on their panel — and as the first round of Obamacare litigation proves, the fact that a legal argument is widely derided by legal experts is not enough to ensure that ideological judges will not take it seriously.

In the event that these two judges decide to defund Obamacare, it is unlikely that their decision will stand for long. The panel’s opinion can be appealed to the full United States Court of Appeals for the District of Columbia Circuit, and 7 of the court’s 11 active judges were appointed by Presidents Clinton and Obama. Nevertheless, even a short-lived decision undermining the Affordable Care Act could throw insurance markets into turmoil. Insurers would have no guarantee that their premiums would be paid. Their customers would be equally uncertain about how much they had to pay. And the business of insurance, by its very nature, depends upon insurers being able to predict what their future income and expenses are likely to be.