Obama's signature health-care law faces a new court challenge.Larry Downing—Reuters
An appeals court says Congress must have meant to make the health care law even more complicated than we thought.
Today
two separate appeals courts handed down decisions on challenges to the
Affordable Care Act, known popularly as Obamacare. One of those courts, a
three-judge panel of the U.S. Court of Appeals for the D.C. Circuit,
ruled that the federal government can’t provide insurance premium
subsidies to people in states that haven’t set up their own insurance
exchanges. The other court rejected that argument.
The D.C. circuit’s opinion, which would invalidate the subsidies paid to about 5 million people,
will be a huge, huge deal if it holds up. Much of the early debate and
legal wrangling over the ACA focused on the “individual mandate,” the
part of law that fines you if you don’t have health coverage. But the
subsidies are even more important because they make the required
coverage affordable for moderate- to middle-income families. (The
subsidies are available to a family of four earning up to $95,400.) The
law says you don’t have to pay the fine if insurance isn’t affordable,
so without the subsidies the mandate doesn’t apply to so many people.
The
ruling could very well be overturned on appeal, and in the meantime the
subsidies remain in place. (You can read more on what happens next in this report by Time’s Kate Pickert.)
But as a reporter who has covered health care reform closely since the
George W. Bush administration, I have to say this ruling just doesn’t
make much sense to me. In particular, four very odd things stand out. 1. The court’s interpretation seems implausible.
Quick background: Obamacare subsidies are issued when you buy
insurance on an online marketplace called an exchange. Some states set
up their own exchanges, but 36 states didn’t, leaving the federal
government to do the job instead. The D.C. Circuit ruled that the law
authorizes the subsidies to be paid only through state-run exchanges.
This ruling hinges on a close reading of the law, a purported effort
to figure out what Congress truly intended. The government, defending
Obamacare, argued that because the law can’t work without the premium subsidies, Congress must have meant them to apply regardless of who ran the exchange.
But the court offered another theory: Maybe Congress meant the subsidies to be an incentive for states to set up their own exchanges.
That sounds like a implausibly flexible approach to what was meant to
be a sweeping national health care law. After all, it essentially gives
any state whose governor or legislature opposes the ACA a chance to opt
out of some its biggest provisions—not just the subsidies, but the
individual mandate, too.
Cast your mind back to the debate in 2009 and 2010. What I remember
was conservatives denying the ACA a single Republican vote and arguing
that Democrats would brook no compromise. Democrats, meanwhile, were
pointing out that Obamacare looked a lot like the Massachusetts law
signed by Republican governor Mitt Romney.
It seems to me that in a long argument over whether Obama and Nancy
Pelosi and Max Baucus were tyrants, or just sweetly reasonable
splitters-of-the-difference, someone might have said: “Hey, if
Republican-led states don’t like the individual mandate, they can always
opt out of the exchanges.”
That did not happen. 2. If the ruling stands, this messes up the insurance markets in 36 states.
If there are no subsidies, that doesn’t only mean that many people
won’t get help from the government to buy coverage. Even those who
didn’t get the subsidies in the first place could face higher prices.
That’s because the law requires the exchanges to sell insurance to
everyone who applies, charge them the same rates (based on age)
regardless of health, and offer a minimum package of benefits. The
problem is that if you don’t have to buy insurance, many people
will do so only when they know they need coverage—i.e., when they are
sick. And if too few healthy people and too many sick people sign up,
insurers have to raise prices to cover the costs. That then means you
have to really sick to want to sign up, and that jacks up rates
more, and so on. This is known in insurance as adverse selection, or a
“death spiral.”
So the federal exchanges could stop working pretty quickly if this
ruling stands. In fact, according to the briefs filed by the insurance
industry and a group of economists who support the ACA, the adverse
selection problem in the exchanges could spill over into the market for
private individual plans outside the exchange too, since the law links
the two markets in various way. How this would actually play out is
unclear, but suffice it say, it’s a major rug-pulling.
Setting up federal exchanges that can’t work seems pretty dumb. Now,
as Michael Cannon of the libertarian Cato Institute says, it’s not like lawmakers never make bad laws.
States have tried to regulate insurance coverage the way the ACA does,
without subsidies, and they’ve run into all these adverse selection
problems. The thing is, people in Washington knew this when the ACA was
being debated and written. It’s why the subsidies and the individual
mandate—a wildly controversial, politically costly provision that many
members of Congress wished would go away—were in the law in the first
place. 3. This somehow involves the Northern Mariana Islands.
The D.C. Circuit panel notes that the ACA in fact did trigger the
“death spiral” problem in this U.S. overseas territory in the Pacific.
That’s because the Northern Mariana Islands were subject to the new
rules about health coverage but left out of the subsidies. That, says
the court, means that maybe Congress really could have meant to regulate
the insurance market without subsidizing it too.
I can think of some other reasons why Congress might have klutzed up
the part the law that applies to U.S. territories. Like the fact that
people in those places have no voting representation in Congress. 4. Congress really isn’t very good at crafting laws
I don’t mean it’s not good at making laws (views may vary on
that). I’m talking about the actual writing-it-down part. The court’s
lead opinion is devastating in showing how badly written parts of the
law are. If these were comments from the professor in a course titled
“Lawmaking 101: Making a Bill a Law,” you’d expect to see a big fat red
“D” at the bottom of Congress’ term paper. The bill was pushed through hastily
after Republican Scott Brown unexpectedly won the late Ted Kennedy’s
seat in the Senate, depriving the Democrats of a filibuster-proof
majority. The craziness of the legislative process shows in the text.
But its not just a craft problem. The legal vulnerability of the ACA
goes hand-in-hand with how politically vulnerable it is. The law makes
sense in a basic way and seems to be helping more people get coverage.
And polls say people like many of the provisions of the law. But it is
also complicated, and hinges on many different players (states,
employers, private insurers, Medicare, Medicaid, you and me…)
interacting in predictable and not-so-predictable ways. From the
beginning, many people have really struggled to get how the law fits together. Turns out that may have included some people in Congress.
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