The Biggest Legal Threat to Obamacare May Have a Chance

Today’s Supreme Court argument
over Obamacare’s contraception mandate may be getting the most
attention, but it’s not the biggest legal threat to the health law
currently in the court system.

That honor goes to Halbig v. Sebelius, a case
challenging the use of the law’s subsidies for health insurance in
the federally run health exchanges operating in 36 states. A
three-judge panel at the U.S. District Court of Appeals for the
District of Columbia heard arguments for that case this morning. I
did not attend the hearing, but most observers seem to agree that
the challengers made a strong showing, and may actually have a
chance at winning the decision.

The case’s underlying argument is really quite straightforward:
Despite clear statutory language saying that the law’s subsidies
were only to be offered within exchanges established by a state,
the Internal Revenue Service (IRS) issued a rule declaring that the
subsidies would also be available through exchanges established by
the federal government. The text of the law is quite clear and
consistent that the subsidies can only be offered in state-run
exchanges. But the IRS and the law’s defenders argue that allowing
subsidies through the federal exchange is acceptable because,
despite the lack of statute, it is consistent with the larger
purpose of the law.

Two of the three judges seem to have made their decisions
already.

Appearing to side with the government in favor of the expansive
IRS rule, Judge Harry Edwards said the argument against the use of
the subsidies in the federal exchanges makes “no sense whatsoever”
and accused the challengers of attempting to “gut the
statute.” 

Judge Arthur Randolph, on the other hand, was friendlier to the
challengers. He said that the statutory language “doesn’t seem to
be malleable,” and he responded critically to a
government lawyer’s argument that the subsidies are authorized
through any exchange. “That’s a leap, not an interpretation,”
he said i

A third judge, Thomas Griffith, offered fewer hints about how he
might decide. But he did appear at least potentially skeptical of
the government’s position, clarifying at one point that an exchange
established by the federal government is not “established by the
State.”

That distinction is the heart of the case. The fact that
Griffith seems to believe that there is a meaningful distinction
suggests he may be willing to side with the challengers against the
government.

Over at The Volokh Conspiracy, Jonathan Adler, who, along with
Michael Cannon of the Cato Institute, coauthored a paper that
inspired the Halbig and several similar legal challenges,

offers a more detailed look into the particulars of the case
and what the courts have gotten right and wrong about the
case.