Do you recall any of the appellate opinions preceding the Supreme Court’s June 2012 affirmance of the ACA’s individual mandate? Come June 2016, you’re no more likely to remember the two decisions that dominated the news last night. To be sure, the issue – whether www.healthcare.gov purchasers are eligible for subsidies – is a big deal. But we’re a long way from a final answer. Here’s our explanation and forecast.
First, some consequences of a successful challenge to healthcare.gov subsidies are clear. If only ACA Exchanges “established by the State” – the ACA’s precise language – may subsidize purchasers, then these things are true in the 36 states not running their own Exchanges in 2014:
- Healthcare.gov awarded subsidies unlawfully this year and will do so again for 2015, creating a ball of confusion perhaps too big to unwind;
- Applicants for whom unsubsidized insurance is “unaffordable” (above 8% of household income) should be exempted from the individual mandate if they don’t buy insurance;
- No employer mandate taxes should be assessed for 2015 or subsequent years.
Whether these challengers should win is less clear. For our non-lawyer readers, here’s an oversimplified analogy that we hope will help. Suppose that you are on a team assigned to build a new prototype vehicle to match an owners’ manual written in the form of an epic poem, one line of which specifies an automatic transmission, but one stanza of which, when discussing brake wear, commends the practice of downshifting while descending long hills. Do you install an automatic, a manual, or some hybrid transmission? The IRS says in these cases, “Leave it to us, and hybrid is the obvious choice.” The pro-subsidy judicial answer is, “Better you than us, and by the way, great choice.” The anti-subsidy judicial answer is, “When the manual says ‘automatic,’ you have no choice.”
The anti-subsidy Halbig (D.C. Cir. July 22, 2014) and pro-subsidy King (4th Cir. July 22, 2014) decisions were made by three-judge panels of large appeals courts. The entire (“en banc”) court may rehear either case, or both. So, what now seems to be a significant circuit split might be reconciled before the Supreme Court weighs in. This matters because circuit splits raise the odds of Supreme Court review. We consider en banc reversal of the Halbig panel opinion more likely than en banc reversal of the King opinion.
Between now and any Supreme Court opinion, lots of water will go under the ACA bridge. We’ll have at least one Congressional election, maybe two. Celebrants on both sides should wait a while to whack their piñatas.
Immediate update: News is breaking that the Administration will seek en banc review of the Halbig panel decision and Senator Reid seemingly confirms that he ”nuked” a judicial filibuster to add to the D.C. Circuit the votes needed to reverse that decision. As we said, this is a long way from over.