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http://ricochet.com/understanding-obamacare-subsidy-rulings/

Understanding the Obamacare Subsidy Rulings
Richard Epstein
July 22, 2014

The battle lines over the Affordable Care Act were drawn sharply today over an exotic question of statutory interpretation that has vast implications for the survival of the ACA as we know it. The two key decisions are Halbig v. Burwell, where Judge Thomas Griffith and Senior Judge Ray Randolph of the D.C. Circuit held that individuals who purchased their health insurance through the federal exchanges were not entitled to the subsidies for those who purchase their coverage through exchanges established by the states. Senior Judge Harry Edwards saw in this decision a “not-so-veiled attempt to gut” the ACA.

In the parallel Fourth Circuit decision in King v. Burwell, a unanimous court thought that the case was indeed close, but then deferred to the decision of HHS on the scope of the provision, relying on the time-honored proposition of the Supreme Court in Chevron USA v. National Resources Defense Council (1984), which holds that, when a statutory text lacks a plain meaning, the courts should defer to the statutory administrator to resolve the ambiguity between the two rival interpretations.

The issue has momentous significance because in some 36 states — through which over half the present enrollees have obtained their coverage — the exchanges are owned and operated by the federal government, not the states. Any judicial decision that knocks out these subsidies will lead to a two-tier system, which in turn will lead to a collapse of the overall program (not to mention a huge level of unpardonable dislocation to those individuals who thought they had coverage but now discover that after the fact they do not). Today’s split decisions create an intolerable level of uncertainty that will only end when the United States Supreme Court decides the case, which it should do on an expedited basis.

These long and learned opinions should not obscure the fact that at the root of the case is a simple question: Do the words an “exchange established by a State” cover an exchange that is established by the federal government “on behalf of a state”? To the unpracticed eye, the two propositions are not synonyms, but opposites. When I do something on behalf of myself, it is quite a different thing from someone else doing it on my behalf. The first case involves self-control. The second involves a change of actors. It is not, moreover, that the federal government establishes the exchange on behalf of a state that has authorized the action, under which case normal principles of agency law would apply. Quite the opposite: the federal government decides to act because the state has refused to put the program into place. It is hard to see, as a textual matter, why the two situations should be regarded as identical when the political forces at work in them are so different. Under the so-called “plain meaning approach”, there is no need to look further. The text does not authorize the subsidies for these transactions, so it is up to Congress to fix the mess that it created in 2010.

Or so the argument of the majority in Halbig goes. Administrative law, however, is a strange subject in which deference is given to the administrator in the case of ambiguity, which can arise, it is commonly claimed, when the statutory language is placed into its larger context. In this case, that context includes a phrase that allows the federal government to set up “such exchange,” from which the inference might be drawn that any exchange that the federal government sets up should be treated for all purposes as if it were a state exchange—a proposition that leaves it unclear why the specific language that relates to the subsidies does not incorporate that understanding. One of the sad features of the original Chevron decision was that it imported ambiguity into a statute whose operative provision was clear by using precisely this tactic: find a different section that can be read in tension with the operative position and allow the administrator to pick between inconsistent readings. Don't forget all the savings promised through the competition the exchanges would provide us, the primary goal of Obamacare for 94% of the people never to get subsidies.]

The first criticism, therefore, of the government’s position is that it is too driven by the Chevron precedent. An issue of this magnitude should not be decided one way in a Democratic administration only for it to be fair game for reversal in a Republican administration. This is a question of law that should be decided by courts, which resolve the ambiguity the best that they can. The administrators are themselves inevitable partisans in these cases, so it makes no sense to defer on questions of legal interpretation where they do not have access to any materials that are not fully available to judges.

Yet the Chevron rule is so ingrained that no circuit court judge would be prepared to depart from that rule if it turns out that the statute does not have a plain meaning. Ultimately, the position of Griffiths is that the meaning was plain (enough) to carry the day. On balance, he was right — notwithstanding the strong counterassault, which comes in three parts.

The first argument is that the context and structure of the act suggests another meaning. This position is derived from Justice O’Connor’s excellent opinion in FDA v. Brown & Williamson, where the question was whether tobacco should be treated as a drug subject to FDA regulation under a statutory provision that stated any substance counted as a drug if was “intended to affect the structure or any function of the body.” That phrase is really broad; indeed, nonsensically so. Justice O’Connor reached the conclusion that was consistent with FDA precedents on the point that it is absurd to sweep into this literal definition any substance for which “there was no claim of therapeutic or medical benefit,” which no one made for cigarettes. Indeed, it would be absurd to think that the FDA should conduct clinical trials to see how tobacco cures cancer.

Yet we are light years from that situation here because it is not incoherent to run a more limited program with the intent to drive states to form these exchanges. Indeed, that was just what was done with respect to the Medicaid mandate, where the effort was to cut out all benefits from pre-existing Medicaid programs if the states did not sign up for the new program—a position that was ultimately rejected by the Supreme Court in NFIB v. Sebelius (which also upheld the individual mandate — which now, of course, has been waived without clear executive authority).

A second point of contention concerns the interaction of legislative history with text. On that subject, there was stunningly little material to go on: only a single statement by Max Baucus in the Senate hearing that the legislation “conditions” the willingness of the state to set up the exchange. What is striking about the defenders of the government is that they do not cite any language that cuts in the opposite direction, but only claim that there is nothing in the legislative history that demonstrates the point. In this connection, however, the single statement by Baucus looms large, both because of his central role in the design of the statute and because there is nothing written on the other side of the issue.

Next it is said by Judge Edwards that the ACA had as its central purpose the extension of coverage to virtually all Americans, which could not be done if the subsidies were denied to people who enrolled on the federal exchange. But the difficulty with that argument is that legislation has multiple purposes, and, although he derides, he does not refute the alternative view: the statutory design was intended to give the states a strong incentive to create their exchanges so that the federal government did not have to expend its resources to do so [The expansion would be single-payer for many through more Medicaid...]. There is, again, little in the debates to resolve this question, but, by the same token, there is no explanation as to why this provision was inserted if it was not intended to have that effect. It would have been simple enough to draft a provision saying that everyone gets the subsidy no matter whether they enroll on the state or federal exchanges.

It is with decidedly mixed emotions that I conclude that the supposed ambiguity is not strong enough to displace the textual simplicity of the Griffith argument. It is really intolerable to first drive people out from private coverage and then pull out the rug from their federal coverage. What a miscarriage of justice. Sadly, however, those issues are not decisive on this question of statutory interpretation. On balance, I have to conclude that Judge Griffith’s opinion looks correct. The text seems to be clear and nothing else seems strong enough to displace it. It is an open question whether the Supreme Court will agree, as its precedents are sufficiently muddy that we live in a world of “anything goes.” My guess is that Griffith’s position will prevail 5-4 in the Supreme Court on a straight conservative-liberal split. This is, to be sure, an odd and unhappy way to make public policy.

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http://www.washingtonpost.com/business/economy/wal-mart-adds-in-store-program-to-help-customers-compare-insurance-offerings/2014/10/05/605e8f88-4b25-11e4-891d-713f052086a0_story.html

Wal-Mart adds in-store program to help customers compare insurance offerings

Wal-Mart announced Monday that it will dive deeper into the health-care market, unveiling an initiative to allow customers to compare and enroll in health insurance plans in thousands of its stores.

Wal-Mart is teaming with DirectHealth.com, an online insurance comparison site and independent health insurance agency, to set up counters in its stores where consumers can talk to licensed agents about plan options.

“Our goal is to be the number one health-care provider in the industry,” said Labeed Diab, president of health and wellness for Wal-Mart U.S. “And the more we broaden our assortment, the more we broaden our offering, the more we educate the customer Wal-Mart is a great place to create a one-stop shop.”

[...]

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http://www.nytimes.com/2014/10/05/us/supreme-courts-robust-new-session-could-define-legacy-of-chief-justice.html

Supreme Court’s Robust New Session Could Define Legacy of Chief Justice

WASHINGTON — The Supreme Court on Monday returns to work to face a rich and varied docket, including cases on First Amendment rights in the digital age, religious freedom behind bars and the status of Jerusalem.

Those cases are colorful and consequential, but there are much bigger ones on the horizon.

“I’m more excited about the next 12 months at the Supreme Court than about any Supreme Court term in its modern history,” said Thomas C. Goldstein, who argues frequently before the court and is the publisher of Scotusblog.

In the coming weeks, the justices will most likely agree to decide whether there is a constitutional right to same-sex marriage, a question they ducked in 2013. They will also soon consider whether to hear a fresh and potent challenge to the Affordable Care Act, which barely survived its last encounter with the court in 2012.

The terms that concluded with those rulings riveted the nation. Now the two issues may return to the court — together.

“This term could become the ‘déjà vu all over again’ term of the century,” said Pratik A. Shah, a Supreme Court specialist with Akin Gump Strauss Hauer & Feld.

Chief Justice John G. Roberts Jr. is entering his 10th term, and it is one that could define the legacy of the court he leads. Should the court establish a right to same-sex marriage, it would draw comparisons to the famously liberal court led by Chief Justice Earl Warren, said David A. Strauss, a law professor at the University of Chicago.

“It is only a slight overstatement to say that the Roberts court will be to the rights of gays and lesbians what the Warren court was to the rights of African Americans,” Professor Strauss said.

Petitions seeking review of decisions in the marriage and health care cases have already been filed. They may be joined in short order by ones on abortion and affirmative action.

“The prospect that every major social issue will collide before the justices may be historic,” Mr. Goldstein said.

[...]

In the new health care challenges, there was initially a vivid split between the federal appeals courts in Washington and in Richmond, Va., which in July issued conflicting decisions within hours of each other.

The appeals court here ruled that the federal government could not provide insurance subsidies to people in states that had chosen not to establish the marketplaces known as exchanges.

The court in Virginia took the opposite view. It said the contested phrase in the law, limiting subsidies to “an exchange established by the state,” was “ambiguous and subject to multiple interpretations.” That means, the court said, that the Internal Revenue Service’s interpretation, allowing subsidies without regard to whether the exchange is run by a state or by the federal government, is entitled to deference.

The split between the two courts was wiped out last month when the full United States Court of Appeals for the District of Columbia Circuit vacated the July ruling and set the case for argument in December.

The Supreme Court is not required to wait. A petition seeking review of the Virginia decision has already been filed, and it takes only four votes to grant review. Four members of the court — Justices Antonin Scalia, Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito Jr. — made their hostility to the Affordable Care Act more than clear in their fiery joint dissent in 2012.

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http://www.scotusblog.com/2014/10/new-debates-over-health-care-subsidies/

New debate over health care subsidies
NOTE TO READERS: The following post was written before the federal government, on Friday evening, filed a brief in the Supreme Court urging the Justices not to get involved in this controversy at this point, and to let the dispute work its way first through the federal appeals court in Washington. The new federal brief is discussed at the end of this post

Arguing that minimizing the federal government’s role in providing health care coverage was crucial to getting the new federal law passed, a group of businesses and individuals on Friday urged a federal appeals court in Washington to bar tax subsidies for anyone who gets insurance at a federal marketplace — now numbering nearly five million people.

The arguments came in the opening brief before the en banc U.S. Court of Appeals for the District of Columbia Circuit, which is reconsidering a basic challenge to a key part of the Affordable Care Act. That challenge had succeeded before a three-judge panel of the D.C. Circuit, but that ruling was wiped out by the full court’s decision to rehear the case of Halbig v. Burwell (Circuit docket 14-5018).

“There is no legitimate way” to read the ACA to allow subsidies in the federal marketplaces, the brief contended.

At stake in the dispute is the federal government’s claim that, if subsidies are not available to those who use them to be able to afford health insurance at a federal exchange, the economic foundations of the entire new law will be threatened and may even crumble.

Congress could avert that by passing a new law to clarify what it meant about the subsidies, but almost no one expects it to do so. Thus, it is up to the courts to decide where subsidies can be provided.

If these tax credits are only available on exchanges that were set up and run by state governments, that would mean that subsidies can be provided only in sixteen states — not enough, the government has contended, to make the whole system economically workable.

Those sixteen states are the ones that had agreed to create their own exchanges. Because the other thirty-four states refused to create insurance exchanges, the ACA then required the federal government to step in and set up one in each of those states.

The core of the challengers’ argument against expanding the availability of subsidies, which was also the central theme of their new brief in the D.C. Circuit, is the role that Congress expected the states to play when it included in the ACA the plan to set up new insurance exchanges to provide opportunities to purchase reasonably priced health coverage.

To get the final few votes necessary for passage of the overall ACA, the new brief said, Congress had to take special steps to avoid creating a system that looked like a national scheme run from Washington, a suspect “single payer” approach.

So, the brief said, to induce the states to set up the exchanges, Congress provided them with financial aid to do so, and fashioned the tax credit scheme to help lower-income Americans who had no insurance to shop for it at an exchange.

This system of incentives, the new filing argued, was deemed by the ACA’s authors to be sufficiently attractive that every state in the nation would decide to join in, creating fifty insurance exchanges. When Congress allowed for subsidies for insurance shoppers, the law said they could go to those who purchased insurance on an exchange “established by the state,” the brief noted.

That language, the challengers contended, is the open-and-shut answer to the legal controversy over the subsidies. Not only does the language speak in simple terms, their brief argued, but the context in which the subsidy question was debated in Congress confirms the centrality of the role that the lawmakers were counting on the states to play.

The text of the law, the document went on, has only one provision that “speaks to subsidies,” and that is the one that plainly limits them to state-run exchanges. The interpretation of legislative language, the brief said, cannot work the “alchemy” of changing an exchange set up by the federal government into one “established by the state,” the challengers said.

Even if the law is understood to mean that the federal government set up its exchanges “on behalf of” the states that refused to do so on their own, that does not mean those U.S. exchanges were actually established by a state, the brief asserted.

The arguments by the government that the whole system cannot work unless subsidies are available at all exchanges are arguments about policy, and policy cannot override the specific text that Congress wrote in the law, the filing asserted.

The federal government’s brief in support of federal exchange subsidies is due at the D.C. Circuit on November 3. The full bench of the D.C. Circuit will hear the case on December 17.

The federal government’s view at this point:

While this controversy unfolds in the filings in the D.C. Circuit, the Supreme Court is also being drawn into it. A separate group of challengers to federal exchange subsidies asked the Justices at the end of July to overturn a ruling upholding those credits, by the U.S. Court of Appeals for the Fourth Circuit. That case is King v. Burwell.

The Obama administration’s response to that appeal was filed in the Supreme Court on Friday evening, and it urged the Justices not to take up the case, at least until after the D.C. Circuit has completed its review. There is now no split among federal appeals courts, since the D.C. Circuit panel’s ruling against the subsidies has been set aside, it noted.

The government argued that the challengers “identify no sound reason for this Court to depart from its usual practice of taking up the question presented in the absence of a disagreement among the courts of appeals and while the D.C. Circuit’s en banc proceeding remains pending.” IOW, give them time to work the entire court loaded with liberals, then ignore the facts.

While there may have been uncertainty about the future of the ACA at the time that there was a split between the D.C. and Fourth Circuits over the subsidies question, the D.C. Circuit’s grant of en banc review “eliminated any uncertainty created by” the panel decision, the government contended. A Mulligan "eliminates any uncertainty" here?.

The federal brief did recognize, in a footnote, that a federal trial judge in Oklahoma this week had ruled in favor of the challengers and against federal exchange subsidies, but the brief commented that the Supreme Court ordinarily does not grant review “to resolve conflicts between district courts and courts of appeals.” And, it added, the Oklahoma judge “essentially adopts the reasoning” of the D.C. Circuit panel ruling that has now been vacated.

The government also sought in its Supreme Court brief to head off an argument by the challengers that the Justices needed to resolve the legality of federal exchange subsidies promptly because millions of people who already have obtained their insurance on those exchanges with the help of the credits might have to return the money to the federal treasury.

Tax cases in courts, the government said, often implicate actions by people relying upon a specific understanding of what the tax law was at the time that they acted. The federal tax law, it said, gives the Internal Revenue Service discretion to refuse to apply retroactively any court ruling on tax liability.

Although the bottom line of the government’s new Supreme Court brief was that the Justices should deny review of the dispute at this point, much of the content of the document was an attempted point-by-point rebuttal to the arguments the challengers had made in taking the case to the Supreme Court. The same points are likely to be made when the government files its brief before the en banc D.C. Circuit next month.

Among the central points on the merits, the federal government argued that the challenge has to depend entirely upon a single, small portion of the massive ACA in which Congress spelled out how shoppers on an insurance exchange could qualify for tax subsidies. The great remainder of the ACA’s provisions on the exchanges, it argued, shows that Congress clearly intended for the exchanges to operate across the country, to help fulfill the goal of providing access to affordable health care.

There is no indication, the document argued, that Congress meant to craft a geographically limited system of access to health care coverage.

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http://www.kaiserhealthnews.org/Stories/2014/October/07/Michelle-Andrews-readers-questions-on-taxes-and-subsidies.aspx

How Will Taxes Be Reconciled With Premium Subsidies?
By Michelle Andrews Oct 07, 2014

This week I answer questions from readers about health insurance premium tax credits and what the penalty is for not having insurance.

Q. I understand that different members of a family can buy different marketplace plans. How does that work with premium tax credits for a husband and wife? How do they get divvied up, and how do we report that to the IRS?

A. If a married couple files their taxes jointly and their income is less than 400 percent of the federal poverty level, ($62,040 for a couple that enrolled for 2014) they were likely eligible for premium tax credits. The premium subsidy they received would have been based on the amounts they were expected to pay for health insurance based on their income compared to the cost of the “benchmark” plan in their area. This benchmark plan is the second-lowest cost silver plan.

A couple can then allocate that subsidy between themselves however they wish, says Judith Solomon, a vice president for tax policy at the Center on Budget and Policy Priorities.

By the end of January 2015, everyone who received a premium tax credit in 2014 should receive a form from the health insurance marketplace that says how much credit they received. Then they should they should add up the totals and report that information on IRS Form 8962.....

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http://www.washingtonpost.com/news/storyline/wp/2014/10/06/the-surprising-health-care-experiment-that-saved-taxpayers-24-million-last-year/

The surprising Obamacare experiment that saved taxpayers $24 million last year
In America's poorest urban county, one medical group is asking a simple question: what if health care is about more than just medicine?

[...]

He came here from a Brooklyn homeless shelter, where his oxygen tank was considered a fire hazard. It’s at least an hour by subway from the Montefiore Medical Center in the Northwest Bronx, where he receives treatment for blood cancer. Last time, he fainted on the train.

Deirdre Sekulic, 42, doesn’t argue. Her job is guided by one belief: Sick people with no home cannot heal. Moral implications aside, that’s an expensive problem for the nation.

“I might have an opportunity for you,” she says. “It could take a while, and it’s hard to tell what will happen. . . . But I need to know you’re interested.”

Sekulic heads Montefiore’s housing unit, which aims to find one-bedroom apartments for homeless patients who show up in the emergency room, again and again. The program is the only one of its kind in New York City.

Montefiore is also an unexpected cost-saving offshoot of the Affordable Care Act — and part of an experimental effort to treat health care as more than just medicine. The dual goal: Save lives, save money.

[...]

Housing, one of the newest initiatives here, takes this idea a step further. Montefiore has housed only two patients, but it plans to push for more.

[...]

In the Bronx, he said, the origins of illness are largely social. About 80 percent of Montefiore’s patients receive Medicaid or Medicare.

“It has to do with how people are housed, what transportation is available, their educational backgrounds,” Racine said. “Until and unless you have a system that’s attuned to these issues, you don’t have the possibility of keeping people healthy.”

[...]

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For the employer, dropping coverage is a pretty decent deal: A company would see its health care costs reduced by over 40 percent. They don’t drop to zero, however, since the employer would still be on the hook for the fines that come along with not offering coverage.

But for the employee, it’s a pretty lousy deal. Lockton ran the numbers, using data on how much employers pay for health insurance now and how much health insurance on the exchanges is projected to cost.They found that employers foot a significantly larger chunk of the insurance bill than the federal government would, even with the new subsidies they’d receive. The firm predicts their premiums would increase anywhere from 79 to 125 percent if they lose employer coverage and have to go to the exchange. There’s such a big variation because exchange subsidies vary by income: Those who earn less are eligible for a larger subsidy.

That doesn’t mean companies won’t necessarily do it; there certainly is a lot for them to save. It does, however, add another wrinkle to the discussion, where employers would need to explain why their workers’ premiums would see massive increases.

LTC8K6

Oct 8 2014, 03:31 AM

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For the employer, dropping coverage is a pretty decent deal: A company would see its health care costs reduced by over 40 percent. They don’t drop to zero, however, since the employer would still be on the hook for the fines that come along with not offering coverage.

But for the employee, it’s a pretty lousy deal. Lockton ran the numbers, using data on how much employers pay for health insurance now and how much health insurance on the exchanges is projected to cost.They found that employers foot a significantly larger chunk of the insurance bill than the federal government would, even with the new subsidies they’d receive. The firm predicts their premiums would increase anywhere from 79 to 125 percent if they lose employer coverage and have to go to the exchange. There’s such a big variation because exchange subsidies vary by income: Those who earn less are eligible for a larger subsidy.

That doesn’t mean companies won’t necessarily do it; there certainly is a lot for them to save. It does, however, add another wrinkle to the discussion, where employers would need to explain why their workers’ premiums would see massive increases.