The Biggest Legal Threat to Obamacare May Have a Chance


credit: MBisanz / Foter / CC BY-SA

Today's Supreme Court argument over Obamacare's contraception mandate may be getting the most attention, but it's not the biggest legal threat to the health law currently in the court system.

That honor goes to Halbig v. Sebelius, a case challenging the use of the law's subsidies for health insurance in the federally run health exchanges operating in 36 states. A three-judge panel at the U.S. District Court of Appeals for the District of Columbia heard arguments for that case this morning. I did not attend the hearing, but most observers seem to agree that the challengers made a strong showing, and may actually have a chance at winning the decision.

The case's underlying argument is really quite straightforward: Despite clear statutory language saying that the law's subsidies were only to be offered within exchanges established by a state, the Internal Revenue Service (IRS) issued a rule declaring that the subsidies would also be available through exchanges established by the federal government. The text of the law is quite clear and consistent that the subsidies can only be offered in state-run exchanges. But the IRS and the law's defenders argue that allowing subsidies through the federal exchange is acceptable because, despite the lack of statute, it is consistent with the larger purpose of the law.

Two of the three judges seem to have made their decisions already.

Appearing to side with the government in favor of the expansive IRS rule, Judge Harry Edwards said the argument against the use of the subsidies in the federal exchanges makes "no sense whatsoever" and accused the challengers of attempting to "gut the statute." 

Judge Arthur Randolph, on the other hand, was friendlier to the challengers. He said that the statutory language "doesn't seem to be malleable," and he responded critically to a government lawyer's argument that the subsidies are authorized through any exchange. "That's a leap, not an interpretation," he said i

A third judge, Thomas Griffith, offered fewer hints about how he might decide. But he did appear at least potentially skeptical of the government's position, clarifying at one point that an exchange established by the federal government is not "established by the State."

That distinction is the heart of the case. The fact that Griffith seems to believe that there is a meaningful distinction suggests he may be willing to side with the challengers against the government.

Over at The Volokh Conspiracy, Jonathan Adler, who, along with Michael Cannon of the Cato Institute, coauthored a paper that inspired the Halbig and several similar legal challenges, offers a more detailed look into the particulars of the case and what the courts have gotten right and wrong about the case.