Balkinization: Politics By Other Means

Politics By Other Means

Guest Blogger

Rob Weiner

In prior posts, I have described Halbig v. Sebelius and King v. Sebelius, the legal challenges to tax subsidies under the Affordable Care Act, as anti-democratic -- an effort by the losing side in a legislative battle to induce credulous or partisan judges to overturn the policy choices of our elected representatives. The charge has prompted righteous indignation among opponents of the ACA. Now, the Constitutional Accountability Center has turned up a video documenting the genesis of the legal theory advanced in Halbig, and it proves my point.[1]

At an American Enterprise Institute conference in late 2010, Thomas Christina, a lawyer for various industry groups on health care issues, presented the results of his search for a statutory “defect” to undermine the ACA. Focusing on the ACA’s tax subsidies enabling low income families to afford health insurance, Christina identified the statutory language that opponents of the Act have read to bar tax subsidies in States with Federal, rather than state-established insurance Exchanges. Immediately after Christina’s presentation, AEI scholar Michael Greve, like a fire and brimstone preacher, urged the flock to find some way -- any way -- to eviscerate the statute:

This bastard [the ACA] has to be killed as a matter of political hygiene. I do not care how this is done, whether it’s dismembered, whether we drive a stake through its heart, whether we tar and feather it and drive it out of town, whether we strangle it. I don’t care who does it, whether it’s some court some place, or the United States Congress. Any which way. Any dollar spent on that goal is worth spending. Any brief filed toward that end is worth filing. Any speech or panel contribution toward that end is of service to the United States.[2]

Law Professor Jonathan Adler later came across the video of the Conference and took on Mr. Greve’s challenge, publishing an article with the Cato Institute’s Michael Cannon that elaborated on the “defect” discovered by Christina. Initially, Adler and Cannon characterized the ostensibly defective provision as a “glitch” or “legal mistake.” And if that supposed error gutted the statute, well, all the better.

Although many by now are familiar with the theory that Adler and Cannon developed and that the plaintiffs advanced in Halbig and King, a brief recap may be helpful in understanding how politics and ideology can erode legal rules and judicial restraint. The dispute involves the insurance marketplaces, or Exchanges, set up in every state under the ACA. The Act requires each state to establish an Exchange, but if the state does not, the Secretary of HHS must do so on the state’s behalf. The anti-ACA argument rests on a section, of the more than 900 in the Act, dealing with the tax subsidies that enable low income families to buy insurance on an Exchange. The first provision of the section at issue makes almost everyone with income less than 400 percent of the federal poverty level eligible for a subsidy. But the ACA opponents focus on another subsection of the same section, setting out the formula for determining the amount of the subsidy. That formula turns on the price of health insurance purchased on an “Exchange established by the State.” Based on this phrase, the ACA opponents contend that low income families in states with a federal Exchange forfeit the tax subsidies the Act would otherwise grant them. Indisputably, when the Secretary steps into the state’s shoes and sets up the Exchange, the Exchange is established for the state. And it clearly is established in the state. But the ACA opponents assert that it is not established by the state.

A key problem the ACA opponents faced in advancing this theory, however, was that it conflicts with fundamental rules of statutory construction. For example, courts interpreting a statute must consider the overall context, while the opponents’ theory focuses on one phrase in isolation. Another canon requires courts construing a statute to avoid interpretations that negate central features of a law, yet the ACA opponents take pride that their theory “guts” the ACA, “drives a stake through its heart,” “blows Obamacare to smithereens,” and so on and so forth. In light of these canons, the opponents of the Act came to recognize -- or at least they should have recognized -- that their textual argument by itself could not likely overcome the deference due the IRS’s contrary interpretation.

Faced with this gap, the opponents came up with a second, belated “discovery.” The statutory “glitch” was not in fact a glitch. Rather, they now claimed, in order to coerce states to establish insurance Exchanges, Congress had intended all along to deny insurance subsidies to low income families in states that did not cooperate. The language buried in the formula for calculating subsidies, they asserted, implemented this intent. The argument brings to mind the scene in the classic Woody Allen movie, Take the Money and Run, where a would-be bank robber ends up arguing with the teller as to whether his note says he has a “gun” or a “gub.” The ACA opponents argue, in effect, not only that the note said “gub,” but that it did so by design.

This position is an after-the-fact rationalization (and not a very good one, at that). At the time the statute was enacted, no one – not legislators, not the press, not academics, and not even plaintiffs themselves – suggested that this provision implemented any such design.

In Congress, no legislator debating these provisions of the ACA articulated the opponents’ reading or the coercive purpose the opponents allege. Common sense counsels that if the statute were intended to hold subsidies hostage in order to cow the states into setting up Exchanges, some legislator would have said so directly. Just a simple declarative sentence would have sufficed: “If the State does not establish an Exchange, its low income citizens will not receive tax subsidies.” No one said that, or anything close to it. But many said the opposite. For example, Senator Baucus, the manager of the bill, noted in debate on November 29, 2009, that “tax credits will help to ensure all Americans can afford quality health insurance.”[3] “All Americans” does not mean “Americans in states that establish their own Exchange”. Likewise, on December 17, Senator Bingaman stated that the “legislation will also form health insurance exchanges in every state,” which will “provide tax credits to significantly reduce the cost of purchasing that [insurance] coverage.[4] “Every” is also an inclusive word, and “every state” includes those with federal Exchanges.

Similarly, in the House, Congressman Paul Ryan complained on March 15, 2010, that the tax credits in the Act were “a new open-ended entitlement that basically says that just about everybody in this country -- people making less than $100,000, you know what, if you health care expenses exceed anywhere from 2 to 9.8 percent of your adjusted gross income, don’t worry about it, taxpayers got you covered, the government is going to subsidize the rest.”[5] Nothing in the phrase “just about everybody” excludes residents in states with federal exchanges. Lest there be any doubt, Congressman Ryan added that, “[f]rom our perspective, these state-based exchanges are very little in difference between the House version - - which has a big federal exchange . . . . But what we’re basically saying to people making less than 400% FPL . . .don’t worry about it. Taxpayers got you covered.”

But it wasn't only members of Congress who thought that the subsidies were available on federally facilitated Exchanges. The supposed targets of the coercion, the decision-makers in the states, thought so, too. The ACA provided state governments with grants to plan for and to establish Exchanges. Almost every State used the funds to assess how the Exchanges would work in their jurisdictions. Governors directed their Departments of Health or Insurance to study the matter, appointed commissions to analyze it, employed outside consultants to dissect it, or deployed some combination of all these approaches. The reports these efforts yielded did not rely on the fear of losing tax subsidies for state residents as the reason to establish state Exchanges. Just the opposite. For example:

· In a report issued on December 15, 2011, the Georgia Health Insurance Exchange Advisory Committee appointed by the Governor advised him that “Georgians will be eligible for the[] subsidies whether the [Exchange] in Georgia is established by the state or federal government.”[6]

· The Kansas Commissioner of Insurance testified on November 24, 2011, that a federal Exchange would perform all the core functions, including determining eligibility for subsidies and tax credits.[7]

· A consultant hired by the State of Arizona reported to the Governor that administration of the subsidies was one of the responsibilities a federal exchange would undertake.[8]

· In a study commissioned by the North Carolina Department of Insurance, the consulting firm Milliman, Inc. listed the pros and cons of allowing the federal government to set up an Exchange in the state. Denial of subsidies to low income families in North Carolina was not one of the cons.[9]

After these studies, the Governors announced their decisions on whether to establish a state Exchange or have the federal government do so instead. Here, too, common sense tells us that a Governor who knew his or her decision would cost taxpayers in the state millions of dollars in subsidies would address the issue directly, justifying the imposition as unavoidable, or arguing that the benefits outweighed it, or blaming the Federal Government. Instead, the principal reasons the Governors advanced for declining to participate were uncertainty about requirements the Federal Government would impose on them, fear of having responsibility for the Exchanges without control, and potential cost.[10] As late as July 2012, the Governor of South Carolina echoed the typical explanations in a letter to Senator Jim DeMint, noting that, “In the case of insurance exchanges, the federal government is not coercing states as much as it is luring them with outrageously large and unaccountable ‘establishment’ grants of taxpayer money. . . .”[11] Far from complaining about the potential demise of tax subsidies, the Governor saw no downside to defaulting to a federal Exchange: “By refusing to implement state-based exchanges, the state is ceding nothing –we were given very little in the first place and, unsurprisingly, asked to give far too much in return.”[12]

With regard to other sources, an army of journalists covered the debate, markup, and hearings on the health care bill, and scholars analyzed the legal, economic, medical, and logistical issues the legislation presented. In extensive searches, I have found no statement while the Act was pending before Congress, treating the disputed provision as an effort to coerce states by withholding tax subsidies, even though commentators homed in on other features of the law designed to induce and coerce state action.

Even the ACA opponents themselves thought that subsidies were available in all states. In a recent post on Politico, Yale Law School Professor Abbe Gluck pointed out that some of the same people presenting themselves now as champions of this newly-discovered Congressional intent had argued just the opposite in seeking to strike down the Act as unconstitutional.[13] Back then, they characterized the subsidies as integral to the operation of the statute and the Exchanges - - all Exchanges. Moreover, in their constitutional challenge to the Act, the states did allege that the provisions involving the Exchanges were coercive, but not because states would lose subsidies if they defaulted to a federal Exchange. The Act coerced states to establish Exchanges, the challengers alleged, because states would otherwise cede regulatory authority to the federal entities.

In short, as the after-the-fact timing of Thomas Christina’s “discovery” indicates, the universal assumption when the ACA was enacted was that the tax subsidies were available to low income families in all states. Notwithstanding the claims of the ACA opponents, no principled form of textualism, nor any other legitimate mode of statutory interpretation, blinds itself to such common understanding. Justice Scalia, the principal judicial proponent of literalism in interpreting statutes, has made clear that even his approach is not so extreme. He has emphasized the importance of the overall context in interpreting statutes and has taken statutory purpose into account. To disregard those limits, to dismiss or distort the common understanding of a statute, to embrace, in Mr. Greve’s words, “any which way” to kill disfavored laws, promotes the political preferences of unelected judges over the policy judgments of the elected branches of government.

Just last week, in a speech to the American Bar Association, Chief Justice Roberts observed that “lawyers fulfill their professional calling to the fullest extent when they rise above particular partisan debates and participate as problem solvers." Tarring and feathering the ACA, driving a stake through its heart, killing it “any which way,” and, in the process, depriving low income families of subsidies they need to buy insurance, could hardly fall farther from the Chief Justice’s mark.

Rob Weiner, formerly Associate Deputy Attorney General in the United States Department of Justice, is a partner at Arnold & Porter LLP. You can reach him by e-mail at robert.weiner at aporter.com

[1] Joey Meyer, The Tale of a Political Attack in Search of a Legal Theory, Constitutional Accountability Center (Aug. 11, 2014), available at http://theusconstitution.org/text-history/2879/tale-political-attack-search-legal-theory.

[2] Id., at 1:30:56 in the video.

[3] 155 Cong. Rec. S11964 (Nov. 21, 2009).

[4] 155 Cong. Rec. S13375 (Dec. 17, 2009).

[5] House Committee on the Budget Holds a Markup on the Reconciliation Act of 2010, Roll Call, 2010 WL 941012 (Mar. 15, 2010).

[6] Georgia Health Insurance Exchange Advisory Committee, Report to the Governor, Dec. 15, 2011, at p. 13.

[7] Sandy Praeger, Kansas Commissioner of Insurance, “WRITTEN TESTIMONY FOR SPECIAL COMMITTEE ON FINANCIAL INSTITUTIONS AND INSURANCE: Federally Facilitated Exchange and State/Federal Partnership Model,” Nov. 14, 2011.

[8] Social Interest Solutions, ACA Health Insurance Exchange Gap Analysis, June 1, 2011 at pp. 73-79.

[9] Milliman, Inc., North Carolina Health Benefit Exchange Study, July 18, 2011, at pp. 85-86.

[10] Halbig v. Sebelius and State Motivations to Opt for Federally Run Exchanges (Feb. 11, 2014), available at http://chirblog.org/halbig-v-sebelius-and-state-motivations-to-opt-for-federally-run-exchanges/

[11] Letter from Governor Nikki Haley to Senator Jim DeMint, July 12, 2012 (emphasis added).

[12] Id. (emphasis added).

[13] Abbe Gluck, Another Hole in the Halbig Verdict, Politico, Aug. 10, 2014, available at http://www.politico.com/magazine/story/2014/08/how-the-halbig-plaintiffs-changed-their-mind-109897.html?hp=pm_2.

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