Bill Levin on The Aftermath of Halbig

My friend and former colleague from the Office of Legal Counsel, Bill Levin, has been following the Halbig case closely.  Here are his thoughts on the aftermath of the case. 

The aftermath of the D.C. Circuit decision in Halbig is encouraging.

On the PR front, it has been unexpectedly difficult for Obamacare defenders.  In recorded speeches from 2011 and 2012, Obamacare architect Jonathan Gruber confirms that the central premise of Halbig is correct:  Obamacare provides subsidies for state exchanges only (“[I]f you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits.”).  Now in 2014 he says his statement, evidently recorded in varying versions on at least seven different occasions, and counting, was “just a speak-o—you know, like a typo,” which, unintelligible valley speak aside, cannot be accurate unless in the Michael Kinsley sense of accidentally telling the truth.

The multiple Gruber audio and video recordings are truly a smoking gun, readily available for all to evaluate the next time someone claims that Halbig seeks to undermine Obamacare, or in the colorful, but demonstrably unsound words of dissenting Senior Circuit Judge Edwards, “This claim is nonsense, made up out of whole cloth.”

To recap the whole cloth for perspective, Obamacare provides subsidies for an exchange “established by the state.”  Nowhere in its 906 pages does the statute manage to apply these simple words to the federal exchange.  Not once in the legislative history is a federal subsidy mentioned by a single legislator.  And now we have an architect of Obamacare, a distinguished MIT economist, not some random talking head or partisan opponent, plainly stating what the law plainly means.  “[I]f you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits.”  It could be a rallying cry, for it truly crystallizes the case, except that the sentence lacks style and cannot fit on a T-shirt.  Yet Obamacare supporters are taking to the barricades and a senior judge feels emboldened to claim the litigation is fanciful.  This could be the stuff of comedy were the stakes not so high. 

In other significant news, Kimberley Strassel of The Wall Street Journal reports that law-abiding bureaucrats within the IRS initially and correctly read Obamacare to exclude subsidies for federal exchanges.  Strassel documents that they were reversed by political functionaries, resulting in published regulations that provide exchange subsidies to all.  Additional recent postings detail the process by which the final bill excluded a provision from the Senate’s HELP Committee draft explicitly providing for federal exchange subsidies.

Sticking strictly to legal considerations, the record is compelling as well.  Powerful statutory arguments support plain meaning, policy and deal-making targeted subsidies as the incentive for states to establish exchanges and no evidence exists in the legislative record supporting payments to a federal exchange.  We are a long way from the derision originally aimed at the case.

Last Friday, the government, as expected, requested en banc review of Halbig in the D.C. Circuit, where the recent court packing assures a reversal and political delay.  On the previous day, in the Fourth Circuit case King v. Burwell, plaintiffs/appellants petitioned the Supreme Court to review the 3-0 loss, arguing the urgent need to prevent billions of dollars in unauthorized subsidy payments, the improper assessment of individual mandate penalties against employers and a severe disruption to the broader U.S. health care insurance market.  Due to the scope of the potential injury, combined with the current split in circuit opinion, the Court is urged to take the case regardless of the outcome of the D.C. en banc review.  While the outcome of the petition is uncertain, it seems highly likely that under any circumstance the Court will render a decision on the merits by June, 2015.

In the long interim that punctuates the case, the discussion moves to the commentators.  As noted by Greg Weiner in an earlier Law and Liberty post, the worst of the arguments is that the “statutory text ought not be interpreted according to its plain meaning if doing so would violate a law’s general intent.”  The President and agencies become rulers of meaning, effectively ending Congress’s role as a co-equal.  When married to the ultra-deferential stance afforded regulators in Chevron, the process subverts separation of powers and the rule of law writ large into Angelo Codevilla’s “triumph of the will.”

The related argument being funneled through the internet and press is that Obamacare, self-evidently designed to make health care affordable, intended subsidies to be paid to all qualifying participants.  Inconvenient language in the statute to the contrary thus constitutes a drafting error.  See Power Line’s recent posts on the difference between poor draftsmanship, which cannot be reversed by a regulator or a court, and drafting error.

While commentators, and even Gruber, can seek to muddle the issue by talking about “typos,” a “speak-o” and poorly worded language, the government in court has embraced a contradictory argument.  Far from being poorly drafted, the law, according to the government, consists of carefully crafted “nested exchange provisions.”

While lawyers are trained to argue in the alternative, the Supreme Court is not going to give credence to the Solicitor General if he says the law was drafted with such clarity as to envision nested provisions, or, if you don’t agree, then the law was a hastily composed mess in which the intent of affordability overrides the plain meaning limit on subsidies.

Setting aside the daunting legal landscape facing the government, in which its only recourse lies in an inapplicable finding of Chevron ambiguity, the case has a practical component that to date has received too little attention.  During oral argument before the D.C. Circuit, it was established that nothing in the statute prevents 36 states from setting up an exchange, even if they initially failed to do so.  For a conservative commentator such as Avik Roy, this leads to the plausible conclusion that a victory in Halbig in practice means nothing as the states will ultimately bend to the pressure of a 100% federal subsidy for its local citizens (“[T]he probability that this ruling leads to the collapse of Obamacare is somewhere between zero and zero. That is to say, zero.”).

But in his sensible admonition to avoid reliance on a lawsuit for salvation, Roy passes by the legal significance of remedy.  It makes all the difference in the world, at least in the practical legal world, to ask the Supreme Court to provide a remedy that otherwise does not exist.

By comparison, the government in Obamacare will be obliged to admit that if the Court upholds the plain meaning of the statute, the supposed harm of insufficient subsidies can be 100% resolved by the formation of state exchanges.  It is on this point that even conservative commentators have incorrectly concluded that Chief Justice Roberts, having invented a tax penalty to avoid ruling Obamacare unconstitutional, or swing voter Justice Kennedy, will likewise ignore plain meaning whose consequence is fully resolvable by the political branches.

We can all place bets, but the two cases are not comparable from a legal perspective.  In Halbig, affirming the limit on subsidies to the state exchanges will let the statute work as written, and would have worked had the IRS regulations not interfered to eliminate the pressure on the states.  In Obamacare I, the decision would have held the statute unconstitutional.

Yet it is precisely in the different posture of the two Obamacare challenges that supporters are in greatest fear and hence quickest to resort to threat over argument.  Ezra Klein is the best, or depending on taste, worst, example of the genre.  “The Supreme Court simply isn’t going to rip insurance from tens of millions of people in order to teach Congress a lesson about grammar.”  While legally this is a non-sequitur, it is a mere preamble to the direct threat:

For five unelected, Republican-appointed judges to cause that much disruption and pain would put the Court at the center of national politics in 2015 and beyond. It would be a disaster for the institution. Imagine when the first articles come out recounting the story of someone who lost their insurance due to the SCOTUS ruling and then died because they couldn’t afford their diabetes or cancer treatment. Imagine when every single Democrat who had any hand at all in authoring the law says the Court is completely wrong about what the law meant. Imagine when every single Democrat runs against the Court.

The challenge is to translate Klein’s gross attempt at intimidation into at least the form of a legal argument.  One version could be that under circumstances that threaten a status quo, the Court must, if possible, construe a statute favorable to continuation of the status quo.  The analog would be to an originalist interpretation defaulting to long-established precedent.  But the analogy demonstrates the error.   The rules of construction, on first impression, for a newly passed statute cannot possibly be justified by appeals to the status quo, at least consistent with a cognizable rule of law.  And yet it is Obamacare supporters who now openly seek a result regardless of the law and in its pursuit are recklessly on the attack.  Judicial activism was the quaint charge of yesteryear.  Now the Court is a co-conspirator in death if it dares to rule that an IRS regulation interfered with the straightforward operation of a federal statute.

That leads to a final question.  Even assuming the Supreme Court upholds the plain meaning restricting subsidies to state exchanges, is Roy right that Halbig does not matter.  The answer turns on the election results in 2014 and 2106.  If voters deliver a Senate majority and a Republican president, the pressure assumed as inescapable by Roy fails.  We still live, if barely, in a country that can be affected by our votes.  Obamacare can be repealed in full and Halbig will make an important, though far from exclusive, contribution.  But Roy is right in the broader sense that Halbig only creates an opportunity, it does not compel a result.  As is said in business, and more so in politics, whoever tires first, loses.

William Levin, a graduate of Yale Law School and former clerk on the D.C. Circuit, manages an investment banking firm

Mike Rappaport

Professor Rappaport is Darling Foundation Professor of Law at the University of San Diego, where he also serves as the Director of the Center for the Study of Constitutional Originalism. Professor Rappaport is the author of numerous law review articles in journals such as the Yale Law Journal, the Virginia Law Review, the Georgetown Law Review, and the University of Pennsylvania Law Review.  His book, Originalism and the Good Constitution, which is co-authored with John McGinnis, was published by the Harvard University Press in 2013.  Professor Rappaport is a graduate of the Yale Law School, where he received a JD and a DCL (Law and Political Theory).

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Comments

  1. Ken Kelly says

    This is pretty silly. Here are the three sentences preceding Gruber’s famous speak-o (first video):

    “… [the Exchanges] will be these new shopping places and they’ll be the place that people go to get their subsidies for health insurance. In the law, it says if the states don’t provide them, the federal backstop will. The federal government has been sort of slow in putting out its backstop, I think partly because they want to sort of squeeze the states to do it.”

    So right there Gruber a) says people will be able to get subsidies from the federal backstop and b) suggests that the feds are trying to scare the States into establishing their own Exchanges with the possibility that the backstop won’t ready on time for the first year of open enrollment.

    This was a pretty stupid thing for Gruber to say, for various reasons, but it obviously cuts against the Halbig view. You can’t “squeeze” the States by delaying an exchange no one would give a damn about. An ACA QHP exchange without subsidies is a logical absurdity – nobody would use it. Insurance providers would never bother to jump through hoops to sell QHPs when they can already sell mandate-satisfying non-QHPs through established channels – brokers, private marketplaces like ehealthinsurance. After all, that’s how they sell to most non-subsidy eligible people now – why change?

    • Jonathan H. Adler says

      Assuming, for the sake of argument, that’s a plausible reading of Gruber’s statements in the first discovered video, what do you make of the other one?

      The third risk, and the one folks aren’t talking about, which may be most important of all, is the role of the states. Through a political compromise, it was decided that states should play a critical role in running these health insurance exchanges. And health insurance exchanges are the centerpiece of this reform, because they are the place that individuals can go to shop for their new, securely priced health insurance. But if they are not set up in a way which is transparent, and which is convenient for shoppers, and which allow people to take their tax credits and use them effectively by health insurance, it will undercut the whole purpose of the bill.

      Now a number of states have expressed no interest in doing so. A number of states—like California, has been a real leader—one of, I think it was the first state to pass an exchange bill. It’s been a leader in setting up its exchange. It’s a great example. But California is rare. Only about 10 states have really moved forward aggressively on setting up their exchanges. A number of states have even turned down millions of dollars in federal government grants as a statement of some sort—they don’t support health care reform.

      Now, I guess I’m enough of a believer in democracy to think that when the voters in states see that by not setting up an exchange the politicians of a state are costing state residents hundreds and millions and billions of dollars, that they’ll eventually throw the guys out. But I don’t know that for sure. And that is really the ultimate threat, is, will people understand that, gee, if your governor doesn’t set up an exchange, you’re losing hundreds of millions of dollars of tax credits to be delivered to your citizens.

      Link: http://reason.com/blog/2014/07/25/obamacare-architect-jonathan-gruber-says

  2. gabe says

    ” In the law, it says if the states don’t provide them, the federal backstop will. ”

    This is a quote from Gruber – not the text of the law. Can you reference the specific test in the law which shows this assertion to be correct?

  3. Eric Rasmusen says

    The WSJ article said: An early draft of its rule about subsidies explained that they were for “Exchanges established by the State.”.
    I’m on the pro-plaintiff side of Halbig, but I’m very skeptical. Page 16 of the committee report cited as the source is the natural place for that to come up. Instead, it says the opposite: “Additionally, according to all seven IRS and Treasury employees interviewed by the.
    Committees, there was an early consensus that these tax credits would be available in all.
    exchanges.60
    ” So it looks to me as if the WSJ article has it dead wrong. Reporters do get things wrong, and I wonder if anybody checked? See

    http://oversight.house.gov/wp-content/uploads/2014/02/IRS-Rule-OGR-WM-Staff-Report-Final1.pdf

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