Robert Pear today writes about an emerging lawsuit over the health care law that I touched on Thursday. The language around the insurance exchanges and whether the state or federal government runs them is sufficiently vague that conservative legal functionaries think they can exploit it:
Starting in 2014, the law requires most Americans to have health insurance. It also offers subsidies to help people pay for insurance bought through markets known as insurance exchanges.
At issue is whether the subsidies will be available in exchanges set up and run by the federal government in states that fail or refuse to establish their own exchanges.
Critics say the law allows subsidies only for people who obtain coverage through state-run exchanges. The White House says the law can be read to allow subsidies for people who get coverage in federal exchanges as well.
If courts rule that individuals seeking coverage on federally administered exchanges cannot receive coverage subsidies, then it gives every right-leaning state a reason to refuse to run the exchanges and collapse the law. The lack of subsidies would make health insurance unaffordable to almost everyone eligible to receive them. And it would put many of them on the hook for the mandate penalty if they cannot afford coverage (the subsidies will be worth on average $6,000 per person). This would make large groups of people angrier and angrier about Obamacare and put more and more pressure on to change the law. It would “prove” to people that the health care law merely forced people to buy coverage they can’t afford or else they would have to pay a tax. The reality is more like that they are forced to buy cheap, subsidized coverage they may not end up being able to use in all cases, or pay a small and easily avoided tax. But a ruling saying that you can’t get subsidies for federal exchanges would deny people the opportunity to experience the law as it was written, and really ruin it before it has a chance.
And just to show that the “but the industry will stop this” model is inoperative, the insurance industry would HATE this outcome, as they would lose millions of customers. If they were rational, they would fight for states to set up their own exchanges. But if anyone wants to bet on their success in red states, I’ll take them up on the offer.
It seems almost impossible that the Supreme Court would rule that legislative intent was to have federally-run exchanges as a backstop if states failed to create one, but not to allow subsidized coverage for them, as they would for state-run exchanges. That just makes no sense. But the originalists probably have just enough ambiguity in the text to make that case, and of course, four of the Justices wanted to take down the entire law just a couple weeks ago. And the fact is that even defenders of the law admit that this was a drafting error. So you cannot discount this possibility.
The IRS wrote a rule allowing subsidies for the state or federal exchanges, and so Republicans get a double-whammy here of undermining a law they don’t like and criticizing the IRS for usurping legislative statutory power:
Representative Phil Roe, Republican of Tennessee, said the rule on premium subsidies “contradicts the explicit statutory language” of the Patient Protection and Affordable Care Act. Mr. Roe and another Tennessee Republican, Scott DesJarlais, have introduced a bill to nullify the rule, issued by the Internal Revenue Service [...]
However, Senator Orrin G. Hatch of Utah, the senior Republican on the Senate Finance Committee, said the Obama administration was usurping the role of Congress and rewriting the law to provide tax credits through federal exchanges.
The larger point here is that Republicans will never stop trying to take down this law. It won’t stop even if Mitt Romney loses in November. It won’t stop if Democrats somehow take over both houses of Congress. It won’t stop if Democrats do well in state legislative races in states where the Medicaid expansion is a toss-up. Republicans put their entire energy into stopping this law from taking effect. And they have a vast store of foot soldiers – in the political arena, in the legal community, in the states, in the think tanks and SuperPACs that try to influence public opinion – willing and able to do this work. The idea that President Obama or some Democratic leader can say “it’s time to move forward” after last month’s Supreme Court decision, and have that be honored, is just fanciful.
…just to add, these “drafting errors” that keep cropping up show what a rush job the actual writing of the Affordable Care Act was, even though the principals had months upon months to write it and incubate it. There was no standard severability clause in the law, which almost proved fatal at the Supreme Court. The coverage subsidies didn’t go below 100% of poverty because of an assumption that those people would get Medicaid, without a contingency in case a state refused to comply. The subsidies started at 100% FPL even though the Medicaid expansion went up to 133%, giving states, thanks to the Medicaid ruling at the Court, an incentive to lower their Medicaid rolls and push people above 100% FPL on the exchanges. Now there’s this drafting problem with federally-run vs. state-run exchanges. There were last-minute revisions to the law all over the place, but these are basic components that the drafters simply didn’t get right. The politics clearly took precedence over writing sound policy.




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“. . .It seems almost impossible that the Supreme Court would rule that legislative intent was to have federally-run exchanges as a backstop if states failed to create one, but not to allow subsidized coverage for them, as they would for state-run exchanges. . .”
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Whether it was a drafting error or not is worth pondering. It could have been a penalty in drag against states failing to set up an exchange.
Or it might have been left in the bill to avoid risking some interim vote, and with the intention of fixing it and other defects legislatively later on.
How about the actual wording in those two sections? Was the Fed exchange section simply missing a word, or is there something more substantial than that? A close comparison of both the sections is worthwhile. Were they even written at the same time and by the same people?
It will be interesting to see what the courts do. One thing for sure, it’ll be as they please.
I don’t fault draftees for not anticipating that the court would rewrite the statute wrt Medicaid in ways to make it unworkable. It was careless, however, to write the subsidy provisions without recognizing the exchanges could be federal, since the statute provided for that. Something smells about how that ever got through.
it says this:
“Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange.”
then it says:
“If—
(A) a State is not an electing State under subsection (b); or
(B) the Secretary determines, on or before January 1, 2013, that an electing State—
(i) will not have any required Exchange operational by January 1, 2014; or
(ii) has not taken the actions the Secretary determines necessary to implement—
(I) the other requirements set forth in the standards under subsection (a); or
(II) the requirements set forth in subtitles A and C and the amendments made by such subtitles;
the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within
the State and the Secretary shall take such actions as are necessary to implement such other requirements.”
but with respect to the subsidies, it says (p.110):
“(2) PREMIUM ASSISTANCE AMOUNT.—The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of—
(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section
152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act.”
And everything subsequent pivots off that. So as drafted, the subsidies don’t account for the situation where the federal government runs the exchange if the state fails to assemble it.
Just remember that this legislation was proposed by the Heritage Foundation as their alternative to Hillarycare. Now, did they put the poison pills in the model legislation, did Congress put the poison pills in the legislation, or are these challenges going to fail? Max Baucus insisted on state exchanges. The House on a federal exchange. How does the Supreme Court handle intent in matters of reconciliation (the procedure, not the strategy for overcoming a filibuster on budget matters)?
What will happen if folks in red states are denied coverage by their state legislatures but folks elsewhere are getting coverage and bragging about it?
Who wants to hazard that the 2014 date was put on implementing exchanges just to allow the complexity of states setting them up or not and the legal fallout from that?
Also, seemingly benign amendments can be ways of setting up legislation to fail. Who besides Baucus was involved in the text that went into the law? Or did something get added or removed after passage (Phil Gramm-style).
Ohh, indeed ,AHCA is flawed,je,je,je.
Yes, something rotten, there is.
Should we not, a some “point”, stop assuming that legislation is “crafted” to our, or even reason’s, “benefit”?
Perhaps it is created to be “changed” to the “bipartisan” advantage or “need” of the moment?
Are we not constantly asking ourselves and each other, “Are ‘they’ stupid … or are they complicit … possibly both?”
Where do we find “evidence” of actual competency or principle?
Considering the intentional “sell-out”, from the very beginning around this health care “insurance” … why would, or should, we expect anything but layer upon layer of deceitful and intentional “failure” … excuse me, unfortunate and completely unintended mistakes or errors?
What is that is said about “bugs” and “features”, Scarecrow?
Must we always forgive the “mistakes” that always further “compromise” everything … as “honest”, as unavoidable, as simply “par” for the course?
Who could have imagined?
Really.
How long would most people have and keep a job that they constantly failed at, that they forever made excuses about, to forgive and distance themselves from that failure?
Fortunately for our “betters”, they do NOT have to live in the real world which is impacted by these, what appear to me to be, deliberate omissions and failures of comprehension … however, the rest of us do have to try to “make do” in a real, hard, and ever more cruel and capricious “place”.
DW
Sometimes is is advantageous to watch the strategy and tactics of how it became rotten. And note the actors who contributed to its rottenness. Max Baucus is the key player in the main points of the legislation, and he had the former VP-Government Relations for Wellpoint write the legislation that was presented to the Senate and became 90% of the bill. But there were other players working to undermine it as well. The ones to focus on are the ones who succeeded in getting amendments into the bill.
No, the 2014 date was clearly to make the law look cheaper inside the 10-year budget window, to delay the subsidies for a couple years.
Righteous stuff, that “intent”, DDay.
What “nice looking” legislation.
If “looks” could kill … then … well …
It would “look” just exactly and precisely as it does.
And “looks” are everything … depending on “location”.
(How high up on the hog are you? Far enough to look down on the little people? … That is the preferred “perch” of the political class … even if they don’t really have any … class.)
“Politics took …” says it all.
DW
Book Salon up with Hannah Gurman’s The Dissent Papers: The Voices of Diplomats in the Cold War and Beyond hosted by Michael K. Busch
OK, so there is no reference to Section 1321, but only to 1311 as shown above? Is this the only place this issue comes up?
In other words, there is nothing but an omission here, and nothing which actively precludes (or authorizes) the subsidy in 1321?
(1321 is for the Fed exchanges)
I’m not a lawyer, but if that’s all it is I don’t see how it could be anything but a drafting error.
Yeah, but Olympia Snowe totally almost voted for it, so really it was time well spent.
Thank God this stroke of political genius is saving us all from the “Disruptive” effects of expanding Medicare to include everybody. As you can see, there is no disruption or difficulty involved with a system that will transfer zillions of tax dollars into private insurance policies. Handshakes for Billy Tauzin and handcuffs for single payer advocates at the Baucus hearings was a crowning achievement of the Democratic majority. They must be glowing with pride.. like Rocky Flats..
A number of those things aren’t mutually exclusive – I’d say to most people (regardless of whether they qualified for the subsidy or not), they’d consider $6K a large chunk of change. This would indeed show the emperor has no clothes with this being corporate welfare and the law should be changed.
“Drafting error” cropping up now when the law was signed into effect in 2010?
I don’t think so.
The Obama backroom deal was cut before Snowe was involved. Obama just wanted preferably for a Republican to sign on after the fact or at least for the appearance of talking to the Republicans in order to provide a smokescreen. The Republicans were irrelevant to the content of this bill other than for PR purposes for Obama and the Democrats as the Republicans took no part in the Obama backroom deal.
She was the proof reader, no?
The error had already been known at least eight months ago when there was a piece in WSJ about it. It was probably known well before that.
If early on the Dems were aware of a potential here, maybe they didn’t consider it wise to pursue any fix during the eight months from ACA passage till the 2010 election. After all, the subsidies wouldn’t kick in for a long, long time. Maybe they put it off not expecting to lose the House.
The GOPers must have been looking for loose ends from the gitgo. I’d bet they knew about this early on and kept it under their hats until it was needed and getting ripe.