How the Courts Could Still Doom Obamacare

The news these days about the Affordable Care Act—aka Obamacare—has been very positive.

On most fronts, it is working quite well. The ranks of uninsured Americans have declined dramatically. People receiving insurance under the act—with numbers that at least match the rosy expectations and projections raised when it was enacted—are quite satisfied. The Commonwealth Fund's extensive survey found 78 percent of those newly insured are satisfied, including 74 percent of Republicans. A majority said their plans included the doctors they wanted; only 5 percent said they had none of their former doctors in their plans.

At the same time, more insurance companies have indicated they will participate in exchanges in 2015, offering affordable plans; that suggests they will do just fine in this marketplace. This is in contrast to the confident and dire predictions of opponents of both huge hikes in premiums in the second year and a drop in insurers that would devastate the market element of the exchanges.

Following Obamacare's disastrous first weeks of rollout, attacks on the law became the central focus of electioneering ads run by Americans for Prosperity and other conservative groups last year and earlier this year. Many of these ads showcased "victims" of the law who turned out, under media scrutiny, to be anything but victims, or people who had not understood their options or the net cost of plans under the exchanges. Republican candidates who planned to run on a "repeal Obamacare" platform, or even a "repeal and replace" plank, have in most cases tried to shift the focus. This is in part because many, like Michigan's Terri Lynn Land, have had no good answer to the question of whether they support the expansion of Medicaid in their states, and they have had no answer about what they would do to replace the ACA.

Plenty of glitches and bumps in the road remain, including the controversy over whether and when to roll out the employer mandate and the fate of the uninsured (not to mention community hospitals and other providers) in states that have refused to extend Medicaid coverage. But proponents of reform have many reasons to be relieved and even satisfied now. When the Medicare prescription-drug law was enacted, it faced a comparably rocky rollout, forcing President George W. Bush to go way beyond the letter of the law to postpone some portions and to require providers to step in where the law did not require it. It was as unpopular as Obamacare when it started—but eight years later, it is widely popular and entrenched. Five years from now, the same might well be true of the Affordable Care Act.

But, of course, the ACA is different in key respects from Medicare Part D. While partisan in its enactment, Part D was bipartisan in its implementation. As Hillary Clinton said when its implementation was at its rocky low, "I voted against it, but once it passed, I certainly determined that I would try to do everything I could to make sure that New Yorkers understood it, could access it, and make the best of it." Democrats in Congress didn't vote once, much less 50 times, to repeal it or gut it, and neither they nor their liberal acolytes filed lawsuits to overturn or upend it.

It is the latter set of moves that should make both proponents of the law and those now insured under it wary right now. Two suits—NFIB v. Sibelius, and Burwell v. Hobby Lobby—resulted in flesh wounds to the law, the first making the expansion of Medicaid voluntary for the states, the second creating exceptions for closely held for-profit corporations when the owners have religious objections. But there is another set of cases that could do much more damage.

I am not talking so much about the now-famous and hyped lawsuit that Speaker John Boehner is launching against the president for failing to faithfully implement the employer mandate element of the ACA. I doubt it has any serious chance of reaching the Supreme Court. Imagine giving standing to a group of lawmakers who say they want the law implemented but who voted against the law, voted dozens of times to repeal it, and themselves called for delay in its implementation!

Rather, the threat comes from an as-yet-little-noticed and more obscure set of four lawsuits filed by ideologically conservative activists and their lawyers, two of which have reached federal Appellate Courts, the D.C. Circuit and the Fourth Circuit both of which could rule any time now on their cases, Halbig v. Burwell and King v. Burwell.

The key to this litigation is an awkward wording in the statute about the subsidies available to the less affluent, which says the subsidies come "through an Exchange established by the State under Section 1311." If we relied only on a literal reading of these words in isolation, there would be no subsidies allowed by exchanges not established by individual states—meaning that millions of people who are insured in the federal exchanges in the 36 states that refused to establish their own state-run marketplaces would be stripped of eligibility for subsidies. This would be devastating for most of them; the insurance they are receiving is affordable because of the financial assistance. But the damage would go beyond these individuals. As they dropped their insurance because of its unaffordability—except for the really sick or endangered among them, who would still benefit by keeping their plans even at a higher cost—it would radically alter all individual insurance markets, changing the risk pool in ways that would destabilize them.

Two individual judges who have heard the case based on these particular words have dismissed it pretty much out of hand. First, as legal scholar Timothy Jost has pointed out, if one reads other sections of the law alongside Section 1311—Sections 1312, 1321, and 1453—it is abundantly clear that Congress created a fallback of federally run exchanges for states that failed to establish their own, defined all exchanges including the federal ones as being "Exchanges established by the State," and made clear that all Americans are residents of states that established exchanges.

Second, it is quite clear what Congress's intent was—and it was not to exclude millions of Americans from the benefits of the law because their states capriciously decided not to establish their own exchanges. The plaintiffs in these cases claim otherwise: that Congress wanted to coerce states to set up their own exchanges by denying the residents of the recalcitrant states any subsidies. It is pretty easy to determine congressional intent in this case—by asking the drafters of the law what their intent was. Five principal drafters—Max Baucus, Tom Harkin, Henry Waxman, Sander Levin, and George Miller—wrote a friend of the court brief making it crystal clear that their intent was to provide benefits and subsidies to all who are eligible.

So why worry? A three-judge panel of the D.C. Circuit that heard the case—the panel whose ruling is imminent—included one Republican-appointed judge with an exceptionally conservative reputation, A. Raymond Randolph, who made it abundantly clear that he would rule for the plaintiffs, and another Republican-appointed judge, Thomas B. Griffith, who could well join him. If this occurs, it will likely have no legal effect for many months. This is because the decision will be put on hold as soon as the Justice Department exercises its option to seek immediate review of the panel's decision by the full complement of judges on the D.C. Circuit. With four Obama appointees recently confirmed as a result of the Senate's 2013 abolition of filibusters for appeals-court judicial nominees, the circuit's final decision will likely affirm the district court's dismissal of the challenges. The Fourth Circuit panel handling its case indicated, during its oral argument in mid-May, that it, too, will probably affirm the trial judge's dismissal of the case.

Two other similar cases, in federal district courts in Oklahoma and Indiana, are wending their way up through their respective circuits. There are no tea leaves yet to predict results in those two cases; ultimately, they could yield a divided outcome, ensuring Supreme Court review. And there is no assurance that the Roberts Court, which came within an eyelash of declaring the entire ACA unconstitutional in the NFIB case, would dismiss this challenge. Justice Antonin Scalia, in particular, has been dismissive of congressional intent, even if this past June, he reaffirmed recognition of an interpretational approach friendly to the Obama administration's case—"the fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme." But Scalia has frequently ruled based on narrow, literal reading of words taken out of context in statutes to satisfy his ideological and political predilections. Were he to do so in this assault on the Obamacare exchanges, he would very likely have his two amigos, Samuel Alito and Clarence Thomas, with him. He might well also have Justice Anthony Kennedy, who joined a dissent fiercely hostile to the ACA two years ago, when the individual mandate was upheld by one vote—that of Chief Justice John Roberts. Would Roberts go against them again, cognizant of the heavy political consequence of stripping millions of Americans of health insurance purchased with the help of ACA tax credits and subsidies? Who knows?

Court challenges that in the past would have been dismissed out of hand are not anymore, in an era in which the federal judiciary, especially the Supreme Court, is polarized and tribalized along the same lines as Congress. Reason enough to be concerned about the future of health reform.