Although religious liberty cases challenging Obamacare (a.k.a. The Affordable Care Act) have captured public attention, other cases that pose a substantially-greater threat to the implementation and very existence of Obamacare are flying under the radar: The Halbig cases (Halbig v. Burwell, Pruitt v. Burwell, King v. Burwell, and Indiana v. IRS). These cases challenge an IRS rule that implements Obamacare by dispensing subsidies and tax credits that were not expressly authorized by the language of the Affordable Care Act as passed by Congress.
Under Obamacare, subsidies and tax credits are provided for purchasing health plans “through an Exchange established by the State.” (emphasis added) The language of Obamacare clearly defines “State” as one of the 50 states or the District of Columbia (D.C.). As only 14 states and D.C. established state exchanges, it would appear that, under the plain language of the law, only those States qualify for subisdies and credits. However, the IRS has been issuing subsidies and credits to those who enroll through the federal exchanges of the 36 states that did not set up state exchanges. Plaintiffs argue that this is illegal.
On July 22, a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit, found in favor of the plaintiffs in Halbig v. Burwell, ruling that subsidies for enrollees of the federal exchanges are illegal. However, just two hours later, a three-judge panel of the U.S. Court of Appeals for the 4th Circuit, found against  the plaintiffs in King v. Burwell, ruling that subsidies for enrollees of the federal exchanges are legal. That case has been appealed to the Supreme Court.
These conflicting rulings on the Court of Appeals level – the highest level of appeal before the Supreme Court – put the cases in a good position for Supreme Court review. However, in what seems to be an attempt to delay or avoid Supreme Court review in these cases, the Obama Administration requested, and was granted , an en banc review of the Halbig case by the U.S. Court of Appeals for the D.C. Circuit.
An en banc review is a review before a full court with all judges (not just a panel of select judges) and is rarely granted. The Administration is aware that Democratic-appointed judges on the D.C. Circuit Court outnumber Republican-appointed judges 8 to 5, and it anticipates that a decision from the full court might well reverse the ruling by the three-judge panel. Furthermore, any delay in reaching a final conclusion likely benefits the Obama Administration as the longer the federal subsidies are normalized, the more they are relied upon, and the greater the disruption if they are discontinued. This may incline judges to rule in favor of the government.
The Plaintiffs in Halbig argue that the IRS rule unlawfully extends tax credits and dispenses subsidies without statutory authority because it violates Obamacare’s plain language. In arguing its defense, the government claimed that it did intend to authorize subsidies and credits through federal exchanges, and that the federal government can create an exchange on behalf of a state. However, Obamacare was written to financially induce the states to create exchanges by making state exchanges – not federal exchanges – a necessary condition for subsidies and credits.
How Does This Affect You And Me?
(1) Subsidies and credits are funded by taxes and penalties against individual taxpayers and employers under Obamacare. In order to cover the additional subsidies and credits being dispersed through federal exchanges, the IRS rule will require higher taxes and penalties on millions of taxpayers and employers.
(2) The majority of the country did not create state exchanges which are required for Obamacare to take effect. Therefore, the reality of whether or not Obamacare can be practically implemented at all, is at stake.
What Happens Now?
It may be that the rehearing has no effect. The full court may find in favour of the plaintiffs or the Supreme Court may decide to hear the King or Halbig cases regardless. Perhaps the other two cases will reach the Supreme Court in their own time.
The Halbig cases have brought to light the reality that Obamacare likely cannot work without subsidies and credits because enrollees most likely will not be able to afford Obamacare without them. Obama and the supporters of the Affordable Care Act simply did not expect that the majority of the states would opt out and not set up exchanges. In essence, the Administration finds itself in a situation where its signature legislation may well be impossible to execute as written. After a full review of the facts, it is my contention that, should the Supreme Court take up the cases, they will find that the Administration did indeed put Obamacare into effect by providing subsidies and credits without the proper statutory authority from Congress.
The statutory outcome of religious freedom cases, such as Hobby Lobby, pale in comparison to the impact of an invalidation of the IRS rule. Although the Halbig cases do not involve “hot button” issues such as contraception and religious liberty, a Supreme Court decision invalidating the IRS rule could well be a final blow to Obamacare.