VII. Key Issues: Regulation & Reform >> C. Health Reform >> Affordable Care Act (ACA) >> ACA Repeal >> Pending Legal/Constitutional Challenges >> IRS Challenge (Exchange Subsidies) (last updated 11.11.14)
1. History of IRS Ruling
2. Congressional Intent
B. Pruitt v. Burwell (10th Circuit Court of Appeals)
C. Halbig v. Burwell (U.S. Court of Appeals for D.C. Circuit)
D. King v. Burwell (U.S. Supreme Court)
E. State of Indiana et al v. IRS et al, (U.S. District Court, Southern District of Indiana)
F. Supreme Court Review
1. Status of Appeals to Supreme Court
2. Implications for ACA
The ACA provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges. An Internal Revenue Service (IRS) rule finalized on May 23, 2012 purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own. Critics argue this rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges. Consequently, the IRS rule is contrary to congressional intent and cannot be justified on other legal grounds. Senator Orrin G. Hatch of Utah, the senior Republican on the Senate Finance Committee, argues that the Obama administration is usurping the role of Congress and rewriting the law to provide tax credits through federal exchanges.
The wording of the statute was first formally discussed in a December 2010 American Enterprise Institute Policy Forum on the ACA presented by Thomas P. Miller, James F. Blumstein, Thomas S. Christina, and Michael S. Greve. This analysis undergirded lawsuits subsequently filed in four different states. FreedomWorks has created an informational video about the 4 cases that have challenged the IRS ruling. Discussion of the Subsidy Cases: Jonathan H. Adler and Michael F. Cannon. Halbig, King, and ObamaCare: What Happened, and What Happens Next? 8.12.14. Video provides basis and history of these suits.
History of the IRS Ruling
- The ObamaCare-IRS Nexus: The Supposedly Independent Agency Harassed the Administration’s Political Opponents and Saved its Health-Care Law. Strassel, Kimberley, Wall Street Journal, 7.24.14. The author provides analysis of the House Government Oversight Committee and Ways and Means Committee report on the Treasury’s decision to expand subsidies to all states’ enrollees. “And it was entirely political. Democrats needed those subsidies. The party had assumed that dangling subsidies before the states would induce them to set up exchanges. When dozens instead refused, the White House was faced with the prospect that citizens in 36 states—two-thirds of the country—would be exposed to the full cost of ObamaCare’s overpriced insurance. The backlash would have been horrific, potentially forcing Democrats to reopen the law, or even costing President Obama re-election. The White House viewed it as imperative, therefore, that IRS bureaucrats ignore the law’s text and come up with a politically helpful rule.”
- The Origin of the Treasury Department’s Halbig Regulation. Blackman, Josh, 7.29.14. The author provides a report on Kimberley Strassel’s Wall Street Journal analysis, with dissection of relevant sections of the House Government Oversight Committee and Ways and Means Committee report.
Pro-ACA Argument. ACA supporters such as Timothy Jost argue that even if the language was not a “scrivener’s error,” congressional intent nevertheless was clear: subsidies would be available in all exchanges, not just those run by the states. Simon Lazarus, a lawyer for the Constitutional Accountability Center, was quoted by the LA Times: “The lawsuits should be seen as preposterous,” he said, because they ask judges to give the law a “nonsensical” interpretation.
- Evidence of Drafting Error. Washington and Lee University health law professor Timothy Jost concedes that the language regarding subsidies on the Exchanges cannot be dismissed as a “scrivener’s error” (in part because it appear 9 different times). However, Greg Sargent has provided a detailed account of the bill’s drafting showing how differing merged versions of the bill passed through Senate HELP Committee and Senate Finance Committee culminated in the “sloppy” language.
- CBO Assumed Subsidies Available in All States. In scoring the bill, for example, CBO assumed subsidies would be available in all states and no objections were raised by Republicans that the CBO analysis was flawed. “It definitely didn’t come up. This possibility never crossed anybody’s mind,” David Auerbach, who was a principal analyst for the CBO’s scoring of the ACA, told TPM on Thursday. “If we started to score it that way, they would have known that, and they would have said, ‘Oh, oh my gosh, no, no no,’ and they probably would have clarified the language. It just wasn’t on anybody’s radar at all.” The CBO itself has said, in a December 2012 letter to House Oversight Chair Darrell Issa (R-CA), that it never considered limited subsidies to only state exchanges.
- Principals in Congress Claim No One Intended Subsidies to be Restricted. According to NPR, two of the Democratic Senators involved in helping to write the law, Tom Harkin (IA), who chairs the Health, Education, Labor and Pensions Committee and Ron Wyden, a senior member of the Finance Committee do not recall that committee members intended for subsidies to be restricted just to state-created exchanges. Similarly, the blog site TPM claims “two staff-level sources directly involved in drafting the law told TPM that no one intended to block subsidies from being administered through the federal website” but does not name either one. “We meant to clean it up in conference, but we never got to conference,” one of the TPM staff sources said. “It’s definitely inartfully drafted.” Greg Sargent’s account likewise includes a number of staffers by name who report that no one working on the bill intended for subsidies to be restricted on federally-run Exchanges.
Anti-ACA Argument. Critics say congressional intent was not so obvious.
- Language Not a Drafting Error. Former Hill staffer Sean Davis has written a very detailed explanation for why the failure to allow subsidies on federally-run Exchanges cannot possibly be due to a “drafting error.” Leon Wolf at RedState points out “the fact that Congress included a clause in an earlier version of the bill but then changed or removed it in the final version is considered to be conclusive evidence that Congress specifically desired the change in question, not that they intended the earlier version.” He concludes by pointing out “My colleague Dan McLaughlin has compiled a list of Supreme Court precedents repeatedly making this exact point – see here, here, and here for just a few examples.”
- Congress Required to Correct Drafting Errors. Sean Davis further notes that even if it were a drafting error the standard procedure and legal requirement is for Congress to pass technical amendments to correct these. Such errors are routinely identified and rectified within days or weeks of a bill’s passage. But the IRS rule was issued 16 months after the bill became law which is an implausibly long time for an agency to discover such a drafting error.
- Other Bills Conditioned Subsidies on State Actions. Michael Cannon has pointed out that both Republicans and Democrats introduced legislation that would have conditioned health-insurance subsidies on states establishing Exchanges. As well, the other leading bill advanced by Senate Democrats in 2009 also gave states the power to block Exchange subsidies. Cannon further has documented that 24 of the 60 Democrats who voted for ACA had earlier cast votes for bills that conditioned the availability of federal subsidies on states taking some action, i.e., using the subsidies as leverage/ inducement for states to do what Congress intended/hoped.
- Enhanced Medicaid Funding Conditioned on State Actions. ACA itself included the provision to strip states that failed to expand Medicaid of the entire amount of federal Medicaid matching funds. This financial penalty was later ruled by the Supreme Court as unconstitutionally coercive: nevertheless, congressional intent was clear. The majority that voted for the bill were willing to risk taking away huge amounts of federal funding from states that failed to take the action they desired.
- “Gruber-Gate.” Recordings of two 2012 speeches of MIT economics professor Jonathan Gruber were uncovered by researcher Rich Weinstein in late July 2014. Gruber, widely considered one of the ACA’s architects, told audiences that subsidies were restricted to state-established exchanges. “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,” he told the nonprofit group Noblis Network. “But your citizens still pay the taxes that support this bill. So you’re essentially saying to your citizens you’re going to pay all the taxes to help all the other states in the country. 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. But, you know, once again the politics can get ugly around this.” When interviewed by the New Republic after the revelations, Gruber called his past comments a “speak-o.”
- Building the Case for Halbig v. Burwell: What States Knew. La Couture, Brittany. American Action Forum, 10.2.14. Some have pointed to a potential weakness in the subsidy cases by claiming that states failed to understand that subsidies were limited to only state-established exchanges. The author reports on several states’ responses to this language, concluding that “these legislators understood the plain text of the law to say that eligibility for federal subsidies arises only from an Exchange established by a State under Section 1311, and not from an Exchange established by the federal government on behalf of the state. This understanding did ultimately contribute to states’ decisions on whether or not to establish their Exchanges.”
Cannon also has codified a series of instances in which Timothy Jost has been incorrect in his predictions on how judges would interpret/rule on various legal challenges to the ACA, including Halbig v. Burwell.
Plain Meaning of Statute
Michael Cannon has pointed out “Let’s stipulate, for the sake of argument, that every member who voted for the PPACA wanted the bill to say something other than what it clearly says.” He argues that the IRS rule still would be viewed as illegal.
President is Bound by Constitution. Even then, the president would not have the authority to issue subsidies through federal Exchanges. He is bound by the Constitution, his oath to it, and judicial precedent to implement the law Congress enacted; all three instruct he has the authority to go as far as Congress allowed him to go, but no farther. If it was Congress’ mistake, Congress must correct it. The president has no authority to “correct” clear statutory language. The very idea is anti-democratic.”
Supreme Court Cannot Disregard Clear Language. The same restriction applies to the Supreme Court:
- Supreme Court Justice Elena Kagan recently wrote in the majority opinion for Michigan vs. Bay Mills Indian Community, “this court does not revise legislation … just because the text as written creates an apparent anomaly as to some subject it does not address….This Court has no roving license, in even ordinary cases of statutory interpretation, to disregard clear language simply on the view that…Congress ‘must have intended’ something broader…Congress of course may always change its mind–and we would readily defer to that new decision…We will not rewrite Congress’s handiwork.”
- In Utility Air Regulatory Group vs. EPA, Justice Antonin Scalia, writing for the majority (in an opinion joined in full by Chief Justice Roberts), stressed that “an agency has no power to tailor legislation to bureaucratic policy goals by rewriting unambiguous statutory terms.” “The power of executing the laws necessarily includes both authority and responsibility to resolve some questions left open by Congress that arise during the law’s administration. But it does not include a power to revise clear statutory terms that turn out not to work in practice.”
Pruitt v. Burwell (U.S. District Court for the Eastern District of Oklahoma)
Overview. In an amended lawsuit originally filed in January 2011, the attorney general for the state of Oklahoma has challenged this rule in court. Two lawyers at McDermott, Will and Emery report:“Oklahoma complains that the availability of the premium tax credit in FFE states triggers the application of the employer mandate (codified at 26 U.S.C. § 4980H) against the state. If so, the state would be forced to provide health coverage to its employees or face a $72,000 penalty each year. Additionally, the state would face penalties under the reporting requirement, section 1514(c) of the ACA (codified at 26 U.S.C. § 6056(c)), of $100 per return, capped at $1.5 million per year. The state further estimates that compliance with the ACA reporting requirements will cost at least $115,000 each year.”
Status. On August 12, 2013, the district court rejected a motion to dismiss the Oklahoma case and ruled that the case could move forward. Specifically the court “dismissed two counts in the amended complaint but upheld three other ones that now will move ahead for consideration under upcoming motions for summary judgment later this year.” On September 30, 2014, Judge Ronald White ruled for the plaintiffs. The case will be appealed to the 10th Circuit Court of Appeals.
Prospects. Given the composition of the 10th Circuit — seven active judges were appointed by Democrats, five by Republicans — Vox blogger Adrianna McIntyre speculates “the ultimate decision at the circuit level would probably favor the government.”
Halbig v. Burwell (U.S. Court of Appeals for D.C. Circuit)
A CATO event on June 17, 2013 addressed the issues and potential impact of this case. Law professor Jonathan Adler and Cato Institute health policy expert Michael Cannon have written the most definitive explanation of the argument in favor of the plaintiffs. This Cato Institute study offers a layman’s version of the arguments.
Michael Cannon has offered a number of blog posts that examine and rebut the various arguments offered in amicus briefs:
- Halbig v. Sebelius: Amicus Brief Of Public-Health Scholars Tries, Fails To Explain Away The ACA’s Clear Language
- Halbig v. Sebelius: Amicus Brief Of Baucus, Harkin, Pelosi, Reid Et Alia Ignores Their Roles In The ACA Debate & Gets Congressional Intent Completely Backward
- Halbig v. Sebelius: The AHA’s Amicus Brief Calls The Constitution A ‘Technicality’ That Could Hurt Hospitals
- AHIP’s Amicus Brief Supports The IRS’s Unauthorized Subsidies To Health Insurers. AHIP does not show why the IRS’s position is correct so much as illustrate why the IRS is defending the incorrect position.
- AARP’s Amicus Brief Concedes Conditional Exchange Subsidies Were Part Of The ACA Debate. Amici either ignore the Patient Protection and Affordable Care Act’s legislative history, or mistake its relevance.
- Economic Scholars Probably Unaware How Much Their Amicus Brief Undercuts The IRS’s Case. Amici describe for the court the “sensible” approach to interpreting the PPACA – and dismiss the plaintiffs’ approach as “absurd,” “implausible,” and “inconceivable” – without ever mentioning, much less analyzing, the actual words of the statute.
- Even If Families USA’s Interpretation Of The ACA Were Correct, The IRS Would Still Lose. Unfortunately for the IRS, but fortunately for taxpayers, Congress expressly precluded Families USA’s absurd interpretation of the PPACA.
References. Cannon, Michael F. Compendium of News and Opinion Coverage. Comprehensive listing of articles, with links, concerning the Halbig case, 2011 to August 8, 2014.
On January 15, U.S. District Judge Friedman dismissed the case, writing: ”The plain text of the statute, the statutory structure, and the statutory purpose make clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges.” He added that there is “no evidence in the legislative record” that lawmakers intended to limit tax credits to people enrolled in state-based marketplaces.
Plaintiffs appealed Friedman’s decision to the U.S. Court of Appeals for the D.C. Circuit which granted an expedited appeal of Judge Friedman’s ruling. A podcast of the March 25 oral arguments is here.
On July 22, in a 2-1 decision (Justice Edwards–a Democratic appointment–dissenting from the opinion of the two Republican-appointed justices), the D.C. Circuit Court of Appeals sided with plaintiffs by ruling that the language of the law barred the government from giving subsidies to people in states that chose not to set up their own insurance marketplaces.
On September 4, 2014, the D.C. Circuit decided to grant en banc review of Halbig v. Burwell. Oral arguments are to be heard Wednesday, December 17, 2014. According to The Hill, the en banc order vacated the judges’ July decision, eliminating, at least temporarily, a circuit split in the matter that could have led the Supreme Court to take up the case.
According to SCOTUSBlog, on November 3, 2014, the Obama administration filed its brief for en banc review in the D.C. Circuit, arguing that the plaintiffs’ view of the issue would lead to the operation of exchanges “on which no individual could lawfully shop and no insurance plan could lawfully be sold.” The challengers’ reply brief is due on November 17. The government’s brief can be read here.
En Banc Hearing. In part because the district court in King v. Burwell reached the opposite decision on the same day, there are split views on whether the court will agree to an en banc hearing:
- The Case for an En Banc Hearing. Lawyer Nicholas Bagley at The Incidental Economist argues “The court is very likely to review the case en banc: it’s undeniably of “exceptional importance” and the decision is, in my view, quite wrong. It also won’t hurt that, after filibuster reform, the court’s seven Democratic appointees outnumber its four Republican appointees.” Because King v. Burwell has been immediately appealed to the Supreme Court, concerrns over how the Supreme Court might rule, might give the D.C. Circuit Court an incentive to quickly accept and rule on an en banc petition since that would eliminate the split between the two circuit courts and lessen odds of SCOTUS review.
- The Case Against an En Banc Hearing.
- En Banc Hearings Extremely Rare. Lawyer Adam J. White notes “Each year the court’s three-judge panels make roughly 500 rulings, but the court averages roughly one en banc rehearing. This year has produced a bumper crop: two. The previous year: zero.”
- En Banc Hearings Face a High Bar. Lawyer Adam J. White asserts that according to Federal Rules of Appellate Procedure: En banc rehearing “is not favored and ordinarily will not be ordered” unless the case satisfies one of two standards. First, an en banc rehearing may be needed to “secure or maintain uniformity of the court’s decisions” (which is not an issue in this case). Second, en banc rehearing is appropriate for what the federal appellate rules call cases of “exceptional importance.” For the D.C. Circuit, this standard has been met almost exclusively by cases raising serious constitutional issues” (again, not an issue).
- Easier to Defer to SCOTUS. Knowing that SCOTUS would be forced to adjudicate such the current split in the two circuit courts, the D.C. Circuit Court might prefer to let them handle such a contentious and momentous issue.
- Defendants’ Request for En Banc Hearing, filed July 22, 2014.
- How En Banc Will Work in Halbig. “When a three-judge panel issues a decision that the full court (currently 11 active judges) does not like, the full court can reconsider the case by choosing to hear it en banc. The rules governing that process are the Federal Rules of Appellate Procedure, D.C. Circuit Rule 35 (see here), and the Handbook of Practice and Internal Procedures for the D.C. Circuit (see here).” (Harvard Law Blog, 7.22.14)
- On September 4, 2014, the D.C. Circuit decided to grant en banc review of Halbig v. Burwell. Oral arguments are to be heard Wednesday, December 17, 2014.
Timetable. Lawyer Peter Huebert at Liberty Justice Center has asserts “an en banc rehearing in either case would almost certainly take six months to a year.” Margot Sanger-Katz at New York Times reports: “This case is likely to be hung up in litigation for a year or more, even if it is appealed immediately.” Lawyer Peter Huebert at Liberty Justice Center has written an extensive account of what could happen next, concluding “despite today’s huge victory for ObamaCare opponents in Halbig, nothing is going to change anytime soon. Whatever route either side takes, this legal battle will likely continue for at least another year or two.” AEI’s Tom Miller also has summarized some alternative scenarios for what will happen next.
Prospects. There is general consensus that the decision will be reversed following the en banc hearing since according to LA Times reporter David Savage: “in the past year, Obama has added four new judges to the D.C. circuit court, giving Democratic appointees a majority for the first time since the mid-1980s.” According to Nicholas Bagley at The Incidental Economist, “If the D.C. Circuit does vote to rehear Halbig en banc, the likely result would be an opinion upholding the tax credits on a theory that looks like the one the Fourth Circuit adopted.”
King v. Burwell (U.S. Supreme Court, No. 14-114)
Overview. In King v. Burwell, four individual taxpayers are challenging the IRS rule and have requested a preliminary injunction on September 10, 2013 on grounds that chaos would ensue were the court to deny the validity of billions of dollars in taxpayer subsidies after they already had been distributed. On October 31, 2013, the court heard arguments on that motion. A complete set of court documents filed to date by plaintiffs is maintained by the Competitive Enterprise Institute (CEI). Michael F. Cannon, Symposium: Seven myths about King v. Burwell, SCOTUSblog (11.10.14) provides a detailed discussion of this case.
Status. Two lawyers at McDermott, Will and Emery report: “On February 18, 2014, Judge Spencer, following the decision of Judge Paul L. Friedman a month earlier in the sister case, Halbig v. Sebelius, granted summary judgment to the government….Like Judge Friedman in Halbig v. Sebelius, Judge Spencer found that the plaintiffs had standing to sue and reached the merits of the arguments. Tackling the plaintiffs’ arguments head on, Judge Spencer admitted that, in a vacuum, the plaintiffs’ interpretation of section 1401(a) of the ACA (which enacted Internal Revenue Code section 36B(b)) would be reasonable. When taken in context of the entire statute, however, Judge Spencer deemed the plaintiffs’ position to be implausible….He found that even if Congress intended to impose such a condition on subsidies, Congress must provide clear notice to the states— and it failed to do so.”
“Immediately after, the plaintiffs appealed to the U.S. Court of Appeals for the Fourth Circuit. Oral arguments were held May 14. On July 22, 2014, court panel (consisting of two Democratic appointees and one Republican) ruled 3-0 that ACA subsidies could be offered through federally-run insurance marketplaces: “It is…clear that widely available tax credits are essential to fulfilling the Act’s primary goals and that Congress was aware of their importance when drafting the bill.” The New York Times reported: “Judge Roger L. Gregory, writing for a three-judge panel of the court, said the contested phrase was “ambiguous and subject to multiple interpretations.” That meant, he said, that the I.R.S.’s interpretation was entitled to deference.” According to Nicholas Bagley at The Incidental Economist, “The Fourth Circuit’s decision in King v. Burwell basically adopts the theory laid out in Judge Edwards’s dissent in Halbig.”
Plaintiffs filed a petition to the U.S. Supreme Court on July 31, 2014. On November 7, 2014, the Court agreed to hear the case. According to Wall Street Journal, arguments are likely in March, with a decision before July 2014. The New York Times reports “the case is likely to be argued in February or March, and a decision will probably arrive in June.”
Prospects. According to Wall Street Journal, “Ron Pollack of Families USA, a group that advocates for the law, said the latest case represented “the most serious existential threat” of the moment to the 2010 law.”
State of Indiana et al v. Internal Revenue Service et al, (U.S. District Court for the Southern District of Indiana, Docket No. 13-1612)
Overview. The latest lawsuit to challenge the exchange subsidies was filed by Indiana Atty. Gen. Greg Zoeller along with 15 public school districts on October 8, 2013. The suit also includes a Tenth Amendment challenge to two aspects of the ACA: (1) the Federal Government’s attempt to apply to the States and their political subdivisions the ACA’s “Employer Mandate,”and (2) a separate ACA provision seeking to tax or regulate States in the same manner as private employers. As summarized by two lawyers at McDermott, Will and Emery: “Indiana and 39 of its public school districts argue that the IRS rule directly injures the state and school districts in their capacities as employers by subjecting them to increased compliance costs and administrative burdens.” Hadley Heath at Health Care Lawsuits observes this case is unique because public school districts are among the plaintiffs.
- Plaintiffs have asked for a declaratory judgment that the IRS Rule violates the Administrative Procedures Act; and enter a permanent injunction prohibiting the application or enforcement of the IRS Rule. Two lawyers at McDermott, Will and Emery report (3.1.14): “Indiana v. IRS, pending in federal court in Indianapolis, is still awaiting an initial conference and a ruling on the government’s motion to dismiss.”
- Indiana Challenge to Obamacare Tax-Credit Rule Goes Ahead. On August 12, 2014, U.S. District Judge William T. Lawrence in Indianapolis denied an IRS bid to dismiss the portion of the state’s 2013 lawsuit claiming the IRS rule illegally conflicts with a provision of the federal law limiting those tax credits to enrollees in state-established exchanges. Lawrence rejected U.S. contentions that Indiana and the 39 state public schools systems that joined it in the suit would suffer no harm from the rule.
Prospects. According to Vox blogger Adrianna McIntyre, “Eventually, we might see a circuit split from Indiana v. IRS, which is pending in a district court in Indiana and could be appealed to the 7th Circuit. In a debate at the University of Michigan Law School on Tuesday, Jonathan Adler, a law professor at Case Western Reserve University, said that the 7th Circuit would likely be receptive to the plaintiffs’ argument.”
Supreme Court Review
Status of Appeals to Supreme Court
- King v. Burwell. Plaintiffs filed a petition to the U.S. Supreme Court on July 31, 2104. The case was accepted on November 7, 2014. University of Michigan law professor Nicholas Bagley has argued that the decision to take this case likely means that at least four justices are skeptical of the government’s arguments and the Fourth Circuit’s decision in King. Case Western University law professor Jonathan Adler acknowledges this possibility but also has explained that the Court might have elected to review the case even if 4 justices did not believe King should be reversed.
- Halbig v. Burwell. Because the D.C. Circuit agreed to an en banc review, no petition to the U.S. Supreme Court will be made until after the court has ruled.
- Pruitt v. Burwell. Until the 10th Circuit Court rules, no petition will be made to the U.S. Supreme Court.
- State of Indiana vs. IRS. Until the 7th Circuit Court rules, no petition will be made to the U.S. Supreme Court.
Implications for ACA
- The Congressional Research Service writes that Halbig “could be a major obstacle to the implementation of the Act.”
- Law professor Michael Greve writes, “all of ObamaCare hangs on the outcome.”
- Levitt, L., Claxton, G. (Kaiser Family Foundation, 7.31.14) The Potential Side Effects of Halbig. “Depending on how you count, that would take premium subsidies away from 4.6 million people in 34 states, or 4.7 million people in 36 states if you count New Mexico and Idaho (which have signaled their intention to operate their own exchanges but are still using the federal marketplace). But, there would also be two important side effects of the Halbig case. First, it would nullify the so-called ‘employer mandate’ in states using the federal marketplace…Second, it would make the individual insurance market unstable and potentially unworkable in federal marketplace states.”
Crippled Federal Exchanges. Under the employer mandate, employers are penalized for not offering coverage only if one or more workers obtain subsidized coverage on the exchange. Likewise, people can obtain an exemption from the individual mandate if the least expensive plan in their area exceeds 8% of income, a situation that will affect many more people if there are no subsidies available through the exchange. Thus, if the court upholds Oklahoma’s position, for example, the immediate effect would be to “cripple the federal exchange operations in Oklahoma, and encourage dozens of other states to mount similar challenges and continue to refuse to authorize their own state-administered exchanges.” If these challenges are successful (or resolved by the Supreme Court), then in states that do not set up their own exchange, the entire employer mandate will be unenforceable, along with the individual mandate for many people. Effectively, the law might well completely collapse in the 28 states planning to rely on a federal exchange (and likely the 7 states in partnership exchanges as well). The bottom line according to one of the proponents of these challenges, CATO Institute’s Michael Cannon: ”This has the potential to sink Obamacare.”