September 4, 2014 at 1:00 am

THE AFFORDABLE CARE ACT

Subsidizing Obamacare's failure

What’s the best way to determine the meaning of a law?

Reading it would be a good start.

That’s what a three-judge panel of the federal appeals court for the D.C. Circuit just concluded in a 2-1 decision in the case of Halbig v. Burwell.

President Barack Obama’s 2010 health reform law says that federal tax credits designed to offset the cost of insurance are available through exchanges “established by the State.” So the D.C. Circuit panel ruled that subsidies can only be distributed through state-run exchanges — not the federally run HealthCare.gov marketplace operating in 36 states.

A separate federal appeals court — the 4th Circuit in Richmond, Virginia — ruled differently. The U.S. Supreme Court may have the last word. The nine justices should side with common sense — and the D.C. Circuit panel’s decision.

Obamacare’s proponents say they didn’t mean “State” per se; they meant for everyone shopping in an exchange to receive tax credits, if their incomes rendered them eligible.

Washington and Lee University law professor Timothy Jost, for example, argued that Congress “surely would have made” an intent to restrict subsidies “far more evident.”

But when they were ramming Obamacare through Congress in March 2010, Democratic lawmakers simply assumed that every state would create an exchange.

Just 10 days after signing the law, Obama stated emphatically that “each state will set up what we’re calling a health insurance exchange.”

It was only much later — when it became clear that less than one-third of states would build exchanges — that the law’s text started to attract attention.

Then there’s the claim from one of Obamacare’s architects, MIT professor Jonathan Gruber, that “literally every single person involved in the crafting of this law has said ... that they had no intention of excluding the federal states.”

But in January 2012, he said the opposite before an audience at Noblis, a research organization based in Virginia: “If you’re a state and you don’t set up an exchange that means your citizens don’t get their tax credits.”

Gruber has since claimed that he “was speaking off-the-cuff” and that “it was just a mistake.” But a subsequent recording at an event at the Jewish Community Center in San Francisco reveals him making the same point.

Critics of the D.C. Circuit’s ruling also charge that, as Jost put it, there’s “no coherent policy reason why Congress would have refused premium tax credits to the citizens of states that ended up with a federal exchange.”

But Jost himself provided such a reason in a 2009 paper entitled “Health Insurance Exchanges: Legal Issues.” He explained that the federal government could either set up a single nationwide exchange or have the states do it.

The problem with the latter idea, Jost notes, is that “Congress cannot require the states to participate in a federal insurance exchange program by simple fiat.”

Instead, it would have to “invite state participation in a federal program, and provide a federal fallback program” for states that refused.

That is precisely what Obamacare ended up doing.

Jost goes on to explain how the feds would need to offer incentives to states to take on this burdensome new task. Those incentives could easily be “offering tax subsidies for insurance only in states that complied with federal requirements.”

That, too, is precisely what Obamacare ended up doing.

Obamacare’s supporters complain that denying subsidies to federal exchange enrollees would disrupt the coverage of roughly 4.5 million people.

But Obamacare’s cost-inflating mandates and new rules have already disrupted the coverage of millions.

Nearly 5 million had their policies canceled because they didn’t meet Obamacare’s Essential Health Benefits requirements.

Millions more are facing higher premiums or reduced wages, as health insurance eats up an ever-growing share of their paycheck.

In his concurrence with the D.C. Circuit panel’s ruling, Judge A. Raymond Randolph wrote that “an Exchange established by the federal government cannot possibly be ‘an Exchange established by the State.’ To hold otherwise would be to engage in distortion, not interpretation.”

Americans should hope that the U.S. Supreme Court opts to “interpret” Obamacare’s text rather than “distort” it.

Sally C. Pipes is president, CEO, and Taube Fellow in Health Care Studies at the Pacific Research Institute.
Her latest book is “The Cure for Obamacare" (Encounter 2013).