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Don't Rule Out the New Obamacare Court Challenges

Alex Wong/Getty Images

Although the Supreme Court upheld the centerpiece of the Affordable Care Act more than a year ago, this was the week that the second round of legal challenges to Obamacare made their prime-time debut. On Tuesday, a federal judge in Washington, D.C., heard arguments in Halbig v. Sebelius, one of a number of cases where states are arguing that the plain text of the ACA doesn’t give the Internal Revenue Service the authority to grant tax credits to those who buy insurance on the federal exchange. The same day, at a House Judiciary Committee hearing, several conservative scholars argued that the president’s decision to delay the implementation of parts of the ACA violated his constitutional duty to “take care” that laws are faithfully executed. And a third claim percolating in the federal appellate courts is the argument that the individual mandate, which the Supreme Court upheld last year as a legitimate exercise of Congress’s taxing power, failed to satisfy the requirements of the Origination Clause of the Constitution, which provides that all bills for raising revenue “shall originate in the House.”

In a podcast debate hosted by the National Constitution Center this week, Jonathan Adler of Case Western University and Simon Lazarus of Constitutional Accountability Center agreed—despite being on opposite sides of all three cases—that the first challenge has the greatest chance of getting traction in the courts. Although their assessment makes sense in the current legal climate, the previous round of litigation over the health-care mandate shows that legal arguments considered off the wall one moment can command a Supreme Court majority the next. Here’s all you need to know about the core arguments in all three cases.

The claim that federally created insurances exchanges aren’t eligible for tax breaks rests on a hyper-textualist parsing of the statutory language in the Affordable Care act itself. As Adler explained, the language of the ACA defines the taxpayers eligible for health insurance subsidies as those who enroll in a health plan “through an Exchange established by the State.” But the IRS has proposed a rule that would extend the subsidies to federal exchanges as well. This, according to critics, violates the plain language of the statute. Adler went on to argue that Congress wanted to condition the authorizing of tax credits on state cooperation, in order to induce the states to create exchanges in the first place.

Lazarus, who also testified at the congressional hearing on Tuesday, called this an implausible account of what Congress intended, as well as inconsistent with the language of the ACA as a whole. In order to accept Adler’s argument, Lazarus said, you have to believe that Senate Democrats intended to give governors the power to “drive a stake through the heart of Obamacare” if they failed to create state exchanges. Lazarus noted that Judge Paul Friedman, at the hearing on Tuesday, asked Michael Carvin, representing the challengers to the ACA, what evidence there was for that interpretation of Congress’s intent and didn’t receive a convincing response. Like the Justice Department, Lazarus went on to argue that the ACA makes clear Congress’s intent to grant subsidies for federally created exchanges.1 In the end, a hyper-textualist judge or justice who wants to seize on one provision in the text of the statute and ignore the broader Congressional intent might accept the challenge; judges like Friedman who are more interested in a realistic appraisal of Congress’s intent seem inclined to be more skeptical.

According to Adler and Lazarus, the other two challenges to the ACA seem less likely to proceed very far in the courts. The second challenge argues that the president’s decision to delay implementation of aspects of the ACA violates his Constitutional duty to “take care that the laws be faithfully executed." The argument here, elaborated in congressional testimony earlier this week, is that the Obama administration's announcement, in a July 2013 blog post, that he would continue “to Implement the ACA in a Careful, Thoughtful Manner” without mentioning the statutory deadline of January 1, 2014, violates his constitutional responsibilities. In addition, the president is alleged to have violated the “take care” clause when he said the federal government would not require insurance companies to implement all the provisions of the ACA on schedule. The counter-argument, as outlined by Lazarus in his congressional testimony, is that the decision to delay enforcement of the employer mandate and other statutory provisions isn’t a decision not to enforce a law that Obama considers his signature legislature achievement. It’s a “phasing in” decision, similar to the ones that agency heads from other administrations have long defended. For example Michael O. Levitt, President George Bush’s Health and Human Services Secretary, declared in July that “The [Obama] Administration’s decision to delay the employer mandate was wise.” And, as Lazarus argued, the Administrative Procedure Act, which allows courts to strike down agency action that is unreasonably delayed, isn’t an inflexible command: Courts have long made clear that the statutory deadline is one factor to consider in evaluating whether a delay is unreasonable. Moreover, Lazarus argued, the mere fact that the Administrative Procedure Act allows courts to force dithering agencies to implement regulations only in rare cases suggests that Congress has long intended to give agencies broad discretion about when to implement the regulations in the first place. Regardless of where you come down in this debate, it will be difficult, as Jonathan Adler notes, to find someone who could satisfy the “standing” requirements to get the case into court because it’s hard to identify someone who has been tangibly injured by the decision to delay implantation of parts of the ACA. For all these reasons, Lazarus predicted the odds “as close to zero as you can get” that a court would buy the “take care” argument.

The third Obamacare challenge claims that the employer mandate, which Chief Justice Roberts upheld last year as a tax, is invalid under the Origination Clause of the Constitution, which provides that all bills for raising revenue “shall originate in the House.” As Adler noted, the point of the Origination Clause was to check the taxing power by ensuring that taxes were levied by representatives who were closer to the people than senators. But federal courts in the past have upheld bills passed under the same procedural maneuver the Senate used for the employer mandate, known as “strike and replace,” where the Senate takes the text of a House bill, erases it, and replaces it with the text of a Senate bill. The Pacific Legal Defense Fund, which is challenging the health care mandate, argues that no previous case “has ever involved as extreme an example of the strike-and-replace procedure as the one used in passing” the Affordable Care Act. But as Adler candidly acknowledged, courts are unlikely to want to distinguish among acceptable and unacceptable versions of the “strike-and-replace” procedure; they’re more likely to view this as the sort of political question that Congress should resolve on its own. “If courts were to address this," Adler said, "they would have to deal with the question of how much amending is too much, and I think the current Court is unlikely to do so.” 

Of course, anything is possible in constitutional litigation: The challenge to the employer mandate itself as exceeding Congress’s power to regulate interstate commerce was initially dismissed by many commentators as implausible. Ultimately, however, five justices accepted it.

Jeffrey Rosen is the legal affairs editor of The New Republic.

  1. At this point the argument becomes technical in the extreme. It rests on a parsing of the statutory provision that if a state fails to create a compliant exchange, the secretary of Health and Human Services shall create “such exchange.” The language “such exchange,” the government argues, indicates that the federal exchanges have all the responsibilities and requirements of exchanges created by the state.