Michael F. Cannon, writing in Forbes before today’s DC Circuit opinion, describes the significance of the court’s decision striking down Obamacare subsidies on federal exchanges.
Halbig is one of four lawsuits challenging the legality of the health-insurance subsidies the IRS is dispensing in the 36 states that did not establish a health-insurance Exchange under the Patient Protection and Affordable Care Act, or â€œObamaCare,â€ and thus have Exchanges established by the federal government. Though the PPACA repeatedly states those subsidies are available only â€œthrough an Exchange established by the State,â€ and there are indications IRS officials knew they did not have the authority to issue subsidies through federal Exchanges, the IRS is dispensing billions of dollars of taxpayer subsidies through federal Exchanges anyway. The Halbig plaintiffs are employers and individuals from six federal-Exchange states who are being injured by the IRSâ€™s actions because those illegal subsidies trigger taxes against them under the PPACAâ€™s employer and individual mandates. The plaintiffs want relief from those illegal taxes, and the only way to get it is to ask federal courts to put a stop to the illegal subsidies. Recent media coverage of Halbig, driven by one-sided blog posts from the consultant group Avalere Health and the left-leaning Urban Institute and Robert Wood Johnson Foundation, has misrepresented the impact of a potential ruling for the plaintiffs by ignoring three crucial facts: (1) a victory for the Halbig plaintiffs would increase no oneâ€™s premiums, (2) if federal-Exchange enrollees lose subsidies, it is because those subsidies are, and always were, illegal, and (3) the winners under such a ruling would outnumber the losers by more than ten to one.
Avalere Healthâ€™s Elizabeth Carpenter blogs, â€œnearly 5 million Americans would receive an average premium increase of 76 percent if the courts ultimately rule that consumers in the federal exchange cannot receive premium subsidies.â€ In another brief post, Linda Blumberg, John Holahan, and Matthew Buettgens of the Urban Institute estimate â€œ7.3 million people, or about 62 percent of the 11.8 million people expected to enroll in federally facilitated marketplaces by 2016, could lose out on $36.1 billion in subsidies.â€ These brief analyses are either misleading or outright false, because they fail to note three crucial facts.
First, a victory for the Halbig plaintiffs would not increase anyoneâ€™s premiums. What it would do is prevent the IRS from shifting the burden of those premiums from enrollees to taxpayers. Premiums for federal-Exchange enrollees would not rise, but those enrollees would face the full cost of their â€œObamaCareâ€ plans.
Critics will respond that, as dozens of economists who filed an amicus brief on behalf of the government have predicted, a Halbig ruling would also cause the full premium to rise by unleashing adverse selection. This claim is based on a fundamental misunderstanding of Halbig and the PPACA. If a lack of subsidies in federal Exchanges leads to adverse selection, Halbig is not the cause. The cause is Congress tying those subsidies to state-established Exchanges, and 36 states refusing to cooperate. Halbig will not and cannot cause adverse selection. It merely asks the courts to apply the law as Congress enacted it.
Second, Avalere Health, the Urban Institute, and media outlets that have repeated their estimates typically neglect to mention that a victory for the plaintiffs would mean the second-highest court in the land ruled the Obama administration had no authority to issue those subsidies or impose the resulting taxes in the first place â€“ that those taxes and subsidies are, and always were, illegal. Regardless of oneâ€™s position on the PPACA, we should all be able to agree that the president should not be allowed to tax and spend without congressional authorization. Thatâ€™s whatâ€™s at stake in Halbig. It is why the Halbig cases are far more important than â€œObamaCare.â€
The termination of those subsidies and the taxes they trigger takes on an entirely different flavor when we introduce that small detail. …
[Which] doesnâ€™t change the fact that 5 million people have been deeply wronged, it does clarify who wronged them: not the Halbig plaintiffs or a few judges, but a president who induced 5 million low- and middle-income Americans to enroll in overly expensive health plans with the promise of subsidies he had no authority to offer, and that could vanish with single court ruling.
Third, these reports and the ensuing media coverage uniformly neglect to mention that a victory for the Halbig plaintiffs would free not only those plaintiffs but tens of millions of Americans from the PPACAâ€™s individual and employer mandates. Indeed, Halbig would free from potential illegal taxation more than ten times as many people as lose an illegal subsidy.
And Jonathan H. Adler just reported the ruling striking down those subsidies in the Washington Post.
This morning the U.S. Court of Appeals for the D.C. Circuit released its much awaited opinion in Halbig v. Burwell. In a 2-1 opinion, the Court held that the Internal Revenue Service regulation authorizing tax credits in federal exchanges was invalid. Judge Griffith, writing for the court, concluded, â€œthe ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges â€˜established by the State.â€ In other words, the court reaffirmed the principle that the law is what Congress enacts â€” the text of the statute itself â€” and not the unexpressed intentions or hopes of legislators or a billâ€™s proponents.