DC Circuit delivers death blow to Obamacare subsidies

UPDATE:  Just a few hours after Halbig v. Burwell was released by the DC Circuit the 4th Circuit issued its ruling in an identical case, and reaching just the opposite conclusion. Unlike the DC Circuit judges, the 4th Circuit judges decided the case on the basis of Congressional “intent”, rather than the actual text that Congress (Democrats only) put into the statute. This reminds me of a quote from my favorite dead Judge, Benjamin Cardozo, who famously said in a case involving the same sort of arguments, whether to supply words that the legislature did not use itself by referring to what they must have intended. Cardozo’s response to that argument was, “The ease with which they could have said so themselves is a warning to us not to supply it by interpretation.”  

It’s even more absurd to try to devine Congressional intent in this case because they themselves didn’t know what was in it, making it impossible to know their intent; they could not have known their own intent since dear leader Nancy Pelosi infamously said, “We had to pass it so we could find out what is in it.”  They had no idea what they were doing, they had no intent other than a selfish desire to jam it down the throats of the American people with highly questionable parliamentary maneuvers, without reading it or knowing what was in it.  The 4th Circuit judges’ claim that they know the intent of the Congressional rascals masquarading as responsible law makers is pure folly.

The vast number of Obamacare policies fall under Federal exchanges and not state exchanges since more than half the states have refused to set up their own health care exchanges. The actual text of Obamacare allows the Feds to subsidize only those policies issued through state exchanges.  A Federal lawsuit, Halbig v. Burwell, has been languishing the DC Circuit Court of Appeals for some time, but today that court released it’s stunning opinion that the text of Obamacare actually means what it so plainly says.  The IRS had issued a regulation stating just the opposite, and that regulation is held to be “not in accordance with law” by today’s decision.

Judge Griffith, writing for the majority in this 2-1 decision, said:

Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American
Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. § 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under
section 1321 of the Act. See 26 C.F.R. § 1.36B-2(a)(1) (hereinafter “IRS Rule”).

Appellants are a group of individuals and employers residing in states that did not establish Exchanges. For reasons we explain more fully below, the IRS’s interpretation of section 36B makes them subject to certain penalties under the ACA that they would rather not face. Believing that the IRS’s interpretation is inconsistent with section 36B, appellants challenge the regulation under the Administrative Procedure Act (APA), alleging that it is not “in accordance with law.” 5 U.S.C. § 706(2)(A).

On cross-motions for summary judgment, the district court rejected that challenge, granting the government’s motion and denying appellants’. See Halbig v. Sebelius, No.
13 Civ. 623 (PLF), 2014 WL 129023 (D.D.C. Jan. 15, 2014). After resolving several threshold issues related to its jurisdiction, the district court held that the ACA’s text,
structure, purpose, and legislative history make “clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges.” Id. at *18. Furthermore, the court held that even if the ACA were ambiguous, the IRS’s regulation would represent a permissible construction entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).

Appellants timely appealed the district court’s orders, and we have jurisdiction under 28 U.S.C. § 1291. Our review of the orders is de novo, and “[o]n an independent review of the record, we will uphold an agency action unless we find it to be ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Holland v. Nat’l Mining Ass’n, 309 F.3d 808, 814 (D.C. Cir. 2002) (quoting 5 U.S.C. § 706(2)(A)). Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges “established by the State,” we reverse the district court and vacate the IRS’s regulation.

As many as 90% of those signed up for Obamacare so far are getting subsidies, most through Federal exchanges.  This case says the text of the Obamacare statute prohibits that.  It is inevitable that a statute this complex will not work as it was written, and there is no way any amendment is going to make it through Congress now.  This could be the last best hope of finally getting rid of the monstrous and damaging legislation that threatens to destroy the American health care system and bankrupt the country, as well as negate the rule of law resulting from the unchecked power of radical politicians and rogue agencies such as the IRS.

The case will of course be appealed, first to an en banc panel of the DC Circuit, and then probably to the Supreme Court.  What will John Roberts do then?  Will he call a subsidy a tax?

  • TMats

    I’ve grown (more) cynical during the years of this presidency. He’s made, I believe, 33 changes to ObamaCare by executive fiat–with no consequences. If he just changes the law a 34th time, who’s going to stop him?

    I remain both perplexed and confounded by Justice Roberts majority opinion that held ObamaCare penalties were a “tax,” in spite of Obama’s strenuous objection to that characterization. The stake through the heart of this iron albatross on America’s taxpayers and healthcare system should have been lifted right there. I try to gin up a bit of optimism as a result of this ruling. T

  • TMats

    typo–“I’ll try”

    • TeeJaw

      Obamacare Court Defense Crumbles: Key Obamacare architect tangled in his conveniently changing story

      But Gruber was singing a very different tune in a 2012 speech before Halbig was filed. In a video that surfaced Thursday night, Gruber noted:

      What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits… I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges.

      In other words, Congress did mean to use the subsidies to overcome state resistance and pressure them to set up their own exchanges. That is precisely what the plaintiffs in Halbig asserted. Of course, Obamacare’s supporters didn’t anticipate that the backlash against the law would be so intense that 34 states would actually decline the subsidies, almost as an act of civil disobedience.

      On Friday morning, an embarrassed Gruber insisted to The New Republic’s Jonathan Cohn, “I honestly don’t remember why I said that… I was speaking off-the-cuff. It was just a mistake.”

      Here is that audio, from, January 10, 2012: