Don’t Panic. Obamacare Is Safe.

The law, lawyers, and the court.
July 22 2014 3:58 PM

Obamacare Is Safe

Don’t worry, the ruling against heath care subsidies is going to be reversed.

Anti-Obamacare.
Anti-Obamacare protesters demonstrate in front of the U.S. Supreme Court on June 28, 2012, in Washington, D.C. Conservatives should celebrate while they can; legal challenges to the law are going to sputter out.

Photo by Alex Wong/Getty Images

Feh. Two Republican appointees to the U.S. Court of Appeals for the D.C. Circuit just grabbed headlines by striking down a key part of Obamacare. Over a stalwart dissent from Judge Harry Edwards (Carter appointee), Judge Thomas B. Griffith (George W. Bush) and Judge Arthur Randolph (George H.W. Bush) have ruled that the federal government may not subsidize health insurance for Americans in states with federally run health insurance exchanges—only Americans in states with their own exchanges.

Emily Bazelon Emily Bazelon

Emily Bazelon is a staff writer at the New York Times Magazine and the author of Sticks and Stones

Twenty-seven states have federally run exchanges, and another bunch have joint federal-state exchanges —here’s a map. Many of these are the states, you may remember, who refused to set up their own in hopes of damaging Obamacare. If this decision were to go into effect, the officials who made that call would very much get their wish. As many as 4.5 million people so far (and a projected 7.3 million by 2016, according to Politico) could lose their subsidies. The financing of the Affordable Care Act would collapse, because so many fewer people could afford to enroll. Obama’s legacy would be wrecked. The sky would also fall.

Don’t run for cover yet, though. Another appeals court conveniently also ruled Tuesday on the very same issue. (The lawyers challenging this aspect of Obamacare have been busy around the country). Going against the D.C. Circuit, the U.S. Court of Appeals for the 4th Circuit decided, by a vote of 3 to 0, that subsidies via the federal exchanges are perfectly fine. The IRS is the agency that wrote the rule authorizing the subsidies, and the 4th Circuit judges “uphold the rule as a permissible exercise of the agency’s discretion.” After explaining that if millions of people’s subsidies were wiped out, “the economic framework supporting the Act would crumble,” and millions more people, left without affordable insurance, would be forced to pay a penalty, the judges concluded: “The IRS Rule avoids both these unforeseen and undesirable consequences and thereby advances the true purpose and means of the Act.” (Two of the three 4th Circuit judges who ruled unanimously today were appointed by Obama. The third, Roger Gregory, the author of today’s opinion, was chosen for a recess appointment by Bill Clinton and then permanently elevated by George W. Bush.)

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The 4th Circuit has the most plausible, commonsense reading of a badly drafted part of a 2,400-page statute. The alternative is that Congress included in Obamacare the seeds of its own destruction, giving naysaying governors the power to kill it—without ever saying so. The history of passing this law was full of devious twists and turns, but that form of willful self-destruction is not among them.

And so, it is the D.C. Circuit’s ruling that is probably going nowhere beyond a victory lap by the strategic conservative lawyers who brought this case, and a round of postmortem hand-wringing among law professors, who are already deriding the decision. That is because the legal reasoning of the majority in D.C. is seriously unconvincing, and as Slate contributor and UC–Irvine law professor Richard Hasen quickly pointed out, the next stop on the legal train is the D.C. Circuit as a whole, where today’s result will likely be reversed. I started by telling you which presidents appointed the judges who have weighed in so far because of the partisan overtones of today’s rulings. The kill-Obamacare judges won in D.C. because they had two out of three votes. But the D.C. Circuit (finally!) has four Obama appointees on it. That means that in the next round before all the active judges of the court, which is called “en banc review,” the split is seven Democrats to four Republicans. Presto: Harry Edwards’ dissent today can be a winner tomorrow.

Today’s twin cases, Halbig v. Burwell and King v. Burwell, pretty much hinge on one section of the ACA: 36B. In that section, Congress wrote that tax credits go to people who buy health insurance in exchanges “established by the State under section 1311.” OK, so let’s go to 1311. What does it say? Section 1311 provides that “each State shall” set up an exchange by the beginning of 2014. If not, we move to Section 1321, which says that the federal government will set up an exchange in the state’s stead. Does that mean Congress intended the same subsidies to go to people who sign up through federally run exchanges as through state-run ones? Yes, say a cadre of experts who know much more about this than I do. To quote one of them, Samuel Bagenstos: “Because Section 1321 provides that a federally-operated exchange will stand in the shoes of a state-operated exchange created by Section 1311, there is no basis for denying participants in federally-operated exchanges the same tax credits obtained by participants in state-operated exchanges.”

This is not the only possible meaning of 36B, because on its face it does say “established by the State.” As Judge Gregory acknowledges, writing for the Fourth Circuit, “the statute is ambiguous and subject to at least two different interpretations.” Why so confusing? Here’s what’s really to blame, as Yale law professor Abbe Gluck writes:

The ACA is a very badly drafted statute. And it’s badly drafted for a simple reason that turns out to be important to understanding how the pending litigation should be resolved: Because Senator Ted Kennedy died in the middle of the legislative process and was replaced by Republican Scott Brown, the statute never went through the usual legislative process, including the usual legislative clean-up process. Instead, because the Democrats lost their 60th filibuster-preventing vote, the version that had passed the Senate before Brown took office, which everyone initially had thought would be a mere first salvo, had to effectively serve as the final version, unchangeable by the House, because nothing else could get through the Senate. 

Judges Griffith and Randolph aren’t interested in this. They claim that they are interpreting 36B through the lens of the rest of the ACA, and that it is still clear that Congress yanked the subsidies away from all the people signing up through federally run exchanges. The majority opinion even has the gall to claim that it comes in sorrow, not in anger. “We reach this conclusion, frankly, with reluctance,” Griffith writes. “At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still.”

Please. This is not about deferring to Congress. It’s about reading a text so myopically that you miss its larger meaning. More from Gluck: It “does a disservice to textualism and all those who have defended it over the years—turning it into a wooden unreasonable formalism rather than the sophisticated statutory analysis that textualists have been claiming they are all about.” The IRS lets people get subsidies when they sign up for health insurance, whatever the type of exchange, because this is what federal agencies are supposed to do: Choose the most plausible reading of a law, the one that fits with the consensus understanding of it. That’s how regulations are made. And once an agency has made its choice, courts are supposed to go along, unless it’s clear that the agency really blew it. Which is hardly true of granting subsidies to people who sign up for health insurance—the basic mechanism of Obamacare.

One more reason I feel confident that the D.C. Circuit’s three-judge panel is on the losing end of this tug of war: Obamacare is increasingly popular. One recent survey found that 74 percent of newly covered Republicans are satisfied with the health coverage they’re getting through the law. Throw in newly covered Democrats and independents, and the rate goes up to 78 percent. Do all those governors who refused to set up state exchanges want the people in their state to be stripped of subsidies now? Does the Supreme Court want to pick up this ax and throw it? Surely the answer is no. Let’s count on the D.C. Circuit to come to its senses in the next round. If that happens, and no other full appeals court strikes down this part of the law, these cases will sputter out. As they should. It’s time to stop picking at the statute’s loose threads and move on to a new national project.

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