Morning Really Must-Read: Nicholas Bagley: ObamaCare and Halbig: What Does This Morning’s Decision Mean?

Nicholas Bagley: ObamaCare and Halbig: What Does This Morning’s Decision Mean?: “In a major setback for the Affordable Care Act…

…the D.C. Circuit just released a fractured opinion invalidating the IRS’s rule extending tax credits to federally facilitated exchanges…. About two-thirds of the states… declined to establish exchanges. In those states, the federal government stepped in and established the exchanges on the states’ behalf. In today’s opinion, the D.C. Circuit held that a federally facilitated exchange isn’t “established by the State under 1311.” As a result, the IRS can’t offer tax credits to those who purchase plans on such exchanges… the average estimated tax credit in 2014 is $4,700….

In a lengthy and passionate dissent, Judge Edwards notes his disagreement at every turn with the government:

The majority opinion ignores the obvious ambiguity in the statute and claims to rest on plain meaning where there is none to be found. In so doing, the majority misapplies the applicable standard of review, refuses to give deference to the IRS’s and HHS’s permissible constructions of the ACA, and issues a judgment that portends disastrous consequences. I therefore dissent.

What happens now?… The government will probably ask the whole D.C. Circuit to review it… after filibuster reform, the court’s seven Democratic appointees outnumber its four Republican appointees.

In all likelihood, the case would be heard en banc in the late fall or winter. If the government loses again—which is unlikely, in my view—the Supreme Court would almost certainly take the case…. This is by no means is this the final word on the exchange litigation. But that’s not to minimize the significance of the court’s decision today…

More from Nicholas Bagley:

In his opinion for the Court, Judge Griffith starts with the text of the statute. He first acknowledges that a federal exchange is a 1311 exchange…. But that’s not enough. As Griffith sees it, “[t]he problem confronting the IRS Rule is that subsidies also turn on… who established them.” The statutory text requires the exchanges–even those established under 1311–to be “established by the State.” Because federal exchanges aren’t established by a state, but by the federal government, individuals who purchase a plan on federally established exchanges are ineligible for tax credits…. What about the ACA requirement that federally established exchanges report on who receives tax credits? Wouldn’t that be superfluous if no one received any such credits? “Not so,” says Griffith. “Even if credits are unavailable on federal Exchanges, reporting by [federally established] Exchanges still serves the purpose of enforcing the individual mandate.”

What about the ACA provision stating that “qualified individuals” can buy plans on an exchange? Since a “qualified individual” is defined in the statute to mean someone who “resides in the States that established the Exchange,” Griffith acknowledges that giving this provision its plain meaning would mean that “the 36 states with federal Exchanges… have no qualified individuals.” Even so, he says, “[t]he government… tilts at windmills.” In Griffith’s view, “[t]he obvious flaw in this interpretation is that the word ‘only’ does not appear in the provision.” [Griffith thus claims that] people in states with federally facilitated exchanges… [are] allowed on those exchanges, even if [they are not “qualified individuals”]…. Griffith addresses the legislative history of the ACA…. In Griffith’s view… silence about whether Congress intended the odd result of depriving individuals on federal exchanges of subsidies is not enough. “[T]here must be evidence that Congress meant something other than what it literally said.”

Griffith concludes his opinion with the following remarkable statement:

We reach this conclusion, frankly, with reluctance. 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. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges.