July 23, 2014

Tuesday, the Federal Appeals Court for the DC Circuit slapped down the Obama administration in a 2-1 ruling that could kill the president's signature health care law. If upheld by the Supreme Court, the ruling would force Congress back to the drawing boards to design a health law that is actually affordable, rather than bearing the false title "Affordable Care Act."

The ruling in Halbig v. Burwell bars the federal government from handing out taxpayer-funded subsidies to people who buy Obamacare plans in nearly two-thirds of the states. Those subsidies took the sting out of being forced to buy pricey Obamacare plans. If the ruling sticks, buyers in those states will have to pay full price, which is, on average, a whopping four times the subsidized price they paid this year.

Quadrupling the price would likely trigger a mass exodus out of the plans, causing what the insurance industry calls a "death spiral."

The ruling by the influential appeals court for the District of Columbia also chastised the Obama administration for rewriting the law to suit its own ends. Halbig is the latest in a series of warnings from federal judges that in America, the rule of law is king, not President Barack Obama.

Judge Thomas B. Griffith, writing for the majority, declared, "The Constitution assigns the legislative power to Congress, and to Congress alone." No more governing by fiat, Mr. President.

The businesses and individuals who sued in Halbig argued that the actual wording of the Affordable Care Act allows the IRS to provide subsidies (via a tax credit) only to buyers in states that established state exchanges. Section 1401 of that law unambiguously states that subsidies will be made available "through an exchange established by the state." The subsidies were intended as a carrot to persuade states to establish exchanges. But surprise, only 14 states went along. The others, mostly led by Republican governors, refused. Late in the game, the Obama administration had to establish the federal healthcare.gov exchange to get Obamacare launched in those uncooperative states.

In 2012, the Congressional Research Service cautioned the text of the law indicated that "the IRS's authority to issue the premium tax credits is limited only to situations in which the taxpayer is enrolled in a state-established exchange." Yet when the Obama administration launched the federal healthcare.gov exchange last fall, IRS officials dispensed tax credit subsidies in all 50 states, despite being warned they were violating the law.

Lawyers for the administration told the appeals court judges that regardless of what Section 1401 says, Congress envisioned offering subsidies to buyers nationwide.

The court didn't buy it.

"The fact is that the legislative record provides little indication one way or the other of congressional intent," wrote Griffith. No wonder. Obamacare was crammed through the Senate on Christmas Eve in 2009, before lawmakers had read it, much less debated it.

What is clear is that without subsidies, the Affordable Care Act is just the opposite — hugely unaffordable. According to the Department of Health and Human Services, 87 percent of people who signed up for Obamacare for 2014 qualified for subsidies, and on average they paid 76 percent less than the true cost of their plan. They paid $82 monthly instead of $376. That $82 price tag didn't mean Obamacare had succeeded in lowering health insurance costs; it just shifted the cost from premium payers to taxpayers.

The court ruled "with reluctance," Griffith said. "At least until states that wish to can set up exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still."

The judges made it clear that either Congress must act to change the law (highly unlikely) or states must establish their own exchanges (also unlikely), or Obamacare will collapse because of its unaffordable premiums.

Yesterday's ruling put Obamacare in legal limbo. Expect the administration to request an en banc hearing before the entire 11-judge appeals court, which is weighted in their favor with seven Democratic appointees. En banc hearings are not always granted, even on issues as monumental as this. Either way, this controversy is headed to the U.S. Supreme Court. Three other federal appeals courts are deciding challenges almost identical to Halbig. A disagreement among any of them will force the high court to rule.

Judges don't like to be overruled. Twice in recent months the Supreme Court has emphatically declared that the executive branch of government must execute the laws, not rewrite them. Down the street at the D.C. Court of Appeals, the judges were listening.

We believe that the Constitution of the United States speaks for itself. There is no need to rewrite, change or reinterpret it to suit the fancies of special interest groups or protected classes.