Economics, Health Care

Halbig v. Sebelius: Courtside notes

Image Credit: shutterstock

Image Credit: shutterstock

March Madness moved to another arena on Tuesday morning at the US Circuit Court of Appeals for the DC Circuit. The legal matchup involved private individuals and employers who are challenging an Internal Revenue Service rule issued in 2012 that authorized the distribution of federal tax credits for insurance premium assistance in the health exchange established by the federal government under the Affordable Care Act (ACA).

The Obama administration was back in court, playing defense against claims that it had failed to enforce the law as it was written and enacted by Congress. Its lawyers were trying to uphold their previous victory in a lower court last January, or at least run out the legal clock while the ACA exchange provisions are implemented and become harder to dislodge.

Yesterday morning, supporters of the IRS rule faced a less favorable set of referees: a three-man crew that included a pair appointed by Republican presidents (Bush (41) and Bush (43)).

The quick takeaway: Judge Harry T. Edwards (1980 Carter appointee) and Judge A. Raymond Randolph (1990 G.H.W Bush appointee) appeared to be pretty committed to opposite sides of the argument. Judge Thomas B. Griffith (2005 G.W. Bush appointee) is the swing vote, and by the end of yesterday’s hearing, he appeared to be swinging toward the appellants (the plaintiffs who had lost in federal district court).

Of course, surface impressions based on questions and comments during oral argument are not foolproof predictors of final rulings. Nor are the quasi-partisan roots behind the judges’ original appointments to the bench. But they are not inconsequential indicators of the different perspectives from which even highly intelligent and deeply experienced federal judges are likely to view legal issues that are intertwined with major public policy considerations and political consequences.

With those disclaimers, the first observation is how quickly and strongly both Judge Edwards and Judge Randolph blew their whistles on fouls by opposing counsel. Judge Griffith was slower to make a call, until the closing minutes.

Judge Edwards scored early points against the appellants’ lead counsel Michael Carvin, by insisting that the legal challenge was really about killing the individual mandate and thereby gutting the Affordable Care Act. He challenged Carvin to provide any other reason to be concerned about whether the law’s exchanges were administered by states or by the federal government.  We might safely predict Judge Edwards as a vote to uphold the lower court ruling against the appellants.

From the other corner of the three-judge panel, Judge Randolph appeared to be fully versed in the full set of arguments against the legality of the IRS rule, as well as the many shortcomings in practice of what the ACA originally promised. His core thought appeared to be that one simply could not get past the plain language of the law’s statutory text, because it is hard to make an exchange established by a state (pursuant to section 1311 of the ACA) be the same as an exchange established by the federal government (under section 1321). That matters because the plain text of another portion of the law (section 1401) limits federal premium assistance tax credits only to an “exchange administered by a state.”

Judge Randolph also noted the parallel structure used previously by Congress in similar laws, particularly strikingly similar language in a 2002 law to condition tax credits for displaced workers upon states complying with various federal requirements. He interjected that the reason why “who” administers health exchanges under the law was so important was that it mattered to states to have control and it mattered to then-Senator Ben Nelson (as the 60th and last swing vote to ensure Senate passage of the law in December 2009).

Judge Randolph highlighted the federal government attorneys’ selective use of “plain meaning” to elevate the importance of less applicable and more ambiguous ACA provisions while ignoring the plain meaning of the primary provisions controlling the tax credits, in section 1311 and section 1401 of the law. He called the federal government’s reading of the statute a leap, not an interpretation. Finally, while recognizing the longstanding “absurdity” rule for courts in reconciling statutory text conflicts, Randolph concluded that there was no “stupidity” principle requiring courts to save stupidly drafted laws.

Behind the appellate court’s divisions over interpreting the IRS rule in the context of the actual statutory text of the ACA are two very different standards of review that judges may choose to adopt.

Supporters of the IRS rule favor looking at the full context of the law’s structure, overall policy purpose, legislative history, and conflicting provisions. If one is guided by the goal of finding some way for Congress to carry out its original overriding purposes (to achieve near-universal coverage), then the result is likely to be what US district court Judge Paul Friedman concluded in his January 15, 2014 opinion that upheld the rule and granted the federal government’s motion for summary judgment. The ACA was a poorly drafted bill that had to be approved by narrow margins in Congress, at the last minute. Its legislative history is extremely limited and provides little guidance on the issues in this case.

Hence, it is not too difficult for skilled attorneys to over-interpret scattered provisions in various corners of the final law that might arguably conflict with the plain meaning of the primary text controlling tax exchanges for exchange-based insured coverage.  In short order, a court can descend down the linguistic rabbit holes of nuanced phrases like “such exchange,” definitions of “qualified individuals,” and exchange reporting provisions added later in budget reconciliation legislation.

However, a different approach to statutory construction of the law’s exchange provisions aims to take Congress at its word in the language it used (however flawed) in approving the ACA. When the relevant language is clear, there is no need to speculate on what Congress might have wished it had done to carry out larger public policy objectives.

Near the end of today’s hearing, Judge Griffith appeared to signal his final call. He originally had indicated he was “not sold” on the legislative history offered by the appellants, but he finally concluded that the competing versions of the ACA’s legislative history “is a wash” and there doesn’t seem to be any clear showing from it. For Judge Griffith, the key issue appears to be “who” establishes the exchange, because this distinction meant a lot to Congress in passing the ACA. In fact, Congress knew how to draw more explicit distinctions between different types of exchanges and the use of tax credits when it wanted to, in the case of ACA provisions adding specific language to treat exchanges in US territories like those administered by a state. Griffith admonished the Obama administration attorneys that they have a special burden to uphold the IRS rule, given the plain language of the key ACA provisions in question.

“Is it our job to fix the problem?” he asked skeptically. Judge Griffith also noted that other political compromises in final enactment and implementation of the ACA have already detracted from its original, overall purpose.

If the appellants succeed in pulling off a narrow 2-1 victory in the DC circuit court, it will be an important shot across the bow of further Obamacare implementation (only 14 states plus the District of Columbia have state-established exchanges in operation thus far), as well as reaffirmation of the rule of law. However, the case still is likely to go into another overtime, via a likely request for an unusual en banc hearing of the entire court of appeals.

While three other related exchange tax credit cases – in federal courts in Virginia, Oklahoma, and Indiana – await their own decisions at different stages of litigation, yesterday’s hearing suggests a stronger possibility of another ultimate rendezvous for Obamacare at the Supreme Court, but no earlier than 2015.

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One thought on “Halbig v. Sebelius: Courtside notes

  1. But nothing can interpret the language of state exchanges into non-existence. What the ACA advocates wanted was a piece of legislation which did not raise the level of scrutiny for medical, i.e, they did not want to create an individually enforceable right to medical care. They claim to this day that medical care policy still need only survive “minimum scrutiny.” But if they are ever to rescue this scheme, they will have to grant that ACA raises the level of scrutiny for medical care to “intermediate” or “strict” scrutiny. Otherwise, the entire scheme will be found unconstitutional, bit by bit.

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