Tag: APA

ObamaCare’s ‘Essential Health Benefits’: Few States Implement, HHS ‘Is in Clear Violation of the Law’

ObamaCare directs the Secretary of Health and Human Services to define the “essential health benefits” that all consumers in the individual and small-group health insurance markets must purchase. HHS Secretary Kathleen Sebelius kicked that decision to the states, giving them a deadline of this past Friday, September 30. Kaiser Health News reports that all of 16 states submitted an Essential Health Benefits (EHB) benchmark to HHS by the deadline.

But did Sebelius have the authority to kick this decision to states? In a September 26 letter to Sebelius, Pennsylvania Insurance Commissioner Michael Consedine writes:

[T]he PPACA clearly states that the Secretary of HHS is to define the EHB package for policies offered both inside and outside of health insurance exchanges. While the language in PPACA was plain that this statutory responsibility fell on HHS, in December of last year HHS issued guidance preliminarily indicating states must select a benchmark design, with HHS potentially acting as final arbiter…of that selection. (Emphasis added.)

Is September 30 even a deadline?

Some communications from your agency indicate that this is a suggested response date while others indicate that it is a deadline of some sort. We again are asking for clarity.

Letting states make that decision will increase flexibility, though. Right?

[I]n reality the guidance placed additional restrictions on the EHB selection rather than flexibility. HHS guidance appears to render the states’ ability to innovate and to make an independent choice illusory. (Emphasis added.)

Indeed, the 16 states who have complied may be in for a rude awakening.

HHS indicated that any selection by the states will be subject to additional review, but we have no definitive guidance as to what, if any, weight will be given to a state’s selection. The minimum amount of information provided to date invites concern that your agency will alter or override a state’s submission…raising serious questions as to whether states have any meaningful ability to make a definitive selection of an EHB benchmark. (Emphasis added.)

Pennsylvania thus declined to submit one, and effectively told Sebelius to do her job.

Louisiana went a step further, threatening to hold Sebelius accountable if she doesn’t. In a September 27 letter, Louisiana’s Secretary of Health and Hospitals Bruce Greenstein and Insurance Commissioner James Donelson noted that the December 2011 “bulletin” merely stated that HHS “intend[s] to propose” a deadline of  September 30 for making that decision—meaning that the bulletin “neither… has the force of law, nor commits federal regulators to any particular course of action.” Moreover:

[I]t is our State’s conclusion that while the bulletin states a decision is to be made by [September 30], this “deadline” has never been formalized through the official rulemaking process. As long as formal rules do not exist, the federal government can change its approach. Since the federal government is not bound by these bulletins, neither are the States. As such, the State of Louisiana is not legally required to submit a benchmark preference by [September 30,] 2012. The State of Louisiana will not permit the federal government to dictate to our residents a default benchmark plan, as the federal government, in its disregard of the requirements of the Administrative Procedure Act regarding essential health benefits and other provisions of the PPACA, has no authority to do so under federal or Louisiana law until regulations are published in the Federal Register, following established notice and comment procedure.

The process developed for defining the essential health benefit benchmark has been a completely new method of establishing law without proper rulemaking. Implementation of new policies without open and public comment and publication in the Federal Register is in clear violation of the law.

The administration has charged states to build what the federal government mandates, but the federal government has provided [only] informal guidance and incomplete rules and regulations…Accordingly, there will be no essential health benefits package for the State of Louisiana, and we will pursue all avenues to prevent the federal government from selecting one on behalf of our state. (Emphasis added.)

As I have written previously, “implementing these parts of the law can only lead to more regulation, fewer choices, and higher costs. And of course, state officials will take the blame when ObamaCare starts increasing costs and denying care to people. There is simply no good reason for states to assume this impossible, harmful, and thankless task.”

Oklahoma Challenges Obama’s Illegal Employer Tax

Yesterday, the attorney general of Oklahoma amended that state’s ObamaCare lawsuit. The amended complaint asks a federal court to clarify the Supreme Court’s ruling in NFIB v. Sebelius, but it also challenges an IRS rule that imposes ObamaCare’s employer mandate where the statute does not authorize it: on employers in the 30 to 40 states that decline to implement a health insurance “exchange.”

Here are a few excerpts from Oklahoma’s amended complaint:

The Final Rule was issued in contravention of the procedural and substantive requirements of the Administrative Procedures Act…; has no basis in any law of the United States; and directly conflicts with the unambiguous language of the very provision of the Internal Revenue Code it purports to interpret…

Under Defendants’ Interpretation, [this rule] expand[s] the circumstances under which an Applicable Large Employer must make an Assessable Payment…with the result that an employer may be required to make an Assessable Payment under circumstances not provided for in any statute and explicitly ruled out by unambiguous language in the Affordable Care Act.

Plaintiff believes…that subjecting the State of Oklahoma in its capacity as an employer to the employer mandate would cause the Affordable Care Act to exceed Congress’s legislative authority; to violate the Tenth Amendment; to impermissibly interfere with the residual sovereignty of the State of Oklahoma; and to violate Constitutional norms relating to the relationship between the states, including the State of Oklahoma, and the Federal Government.

As for the latest claim to be made in defense of the IRS rule – that an Exchange  established by the federal government under Section 1321 is an Exchange “established by the state under Section 1311” – the complaint says this:

If the Act provides or is interpreted to provide that an Exchange established by HHS under Section 1321(c) of the Act is a form of what the Act refers to as “an Exchange established by a State under Section 1311 of [the Act],” then Section 1321(c) is unconstitutional because it commandeers state governmental authority with respect to State Exchanges, permits HHS to exercise a State’s legislative and/or executive power, and otherwise causes the Exchange-related provisions of the Act…to exceed Congress’s legislative authority; to violate the Tenth Amendment; to infringe on the residual sovereignty of the States under the Constitution; and to violate Constitutional norms relating to the relationship between the states, including the State of Oklahoma, and the Federal Government.

Oklahoma does not yet list any private-sector employers as co-plaintiffs, but that may change.

Since this IRS rule also unlawfully taxes 250,000 Oklahomans under the individual mandate – a tax that in 2016 will reach $2,085 for a family of four earning $24,000 – the attorney general has an awful lot of individual Oklahomans that he could add to its plaintiff roster.

Jonathan Adler and I first wrote about President Obama’s illegal taxes on employers in the Wall Street Journal and again in the USA Today. Since parts of those opeds have been overtaken by events, I recommend reading our forthcoming Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Yes, all 82 pages of it.

TSA Should Follow the Law

A year ago this coming Sunday, the U.S. Court of Appeals for the D.C. Circuit ordered the Transportation Security Administration to do a notice-and-comment rulemaking on its use of Advanced Imaging Technology (aka “body-scanners” or “strip-search machines”) for primary screening at airports. (The alternative for those who refuse such treatment: a prison-style pat-down.) It was a very important ruling, for reasons I discussed in a post back then. The TSA was supposed to publish its policy in the Federal Register, take comments from the public, and issue a final rule that responds to public input.

So far, it hasn’t done any of those things.

The reason for the delay, stated in a filing with the court last year, was the complexity and expense of doing a rulemaking in this area. But CEI’s Ryan Radia, at work on a legal brief in the case, notes that the TSA has devoted substantial resources to the PreCheck program during this time, rolling it out to additional airports. How can an agency pour resources into its latest greatest project yet claim poverty when it comes to complying with the law?

So on Monday, I started a petition on Whitehouse.gov. It says the president should “Require the Transportation Security Administration to Follow the Law!

By the end of the day yesterday, the petition had garnered the 150 signatures needed to get it published on Whitehouse.gov. The petition says:

Defying the court, the TSA has not satisfied public concerns about privacy, about costs and delays, security weaknesses, and the potential health effects of these machines. If the government is going to “body-scan” Americans at U.S. airports, President Obama should force the TSA to begin the public process the court ordered.

That’s not a huge request. Getting 25,000 signatures requires the administration to supply a response, according to the White House’s petition rules.

The response we want is legal compliance. The public deserves to know where the administration stands on freedom to travel, and the rule of law. While TSA agents bark orders at American travelers, should the agency itself be allowed to flout one of the highest courts in the land? If the petition gets enough signatures, we’ll find out.

Signing the petition requires an email for confirmation, but it does not sign you up for any mailing list unless you volunteer for that. If you’re quite concerned about sharing an email, you can create a throwaway email on AOL or Yahoo! and use it once.

Please pass the word about the petition. If it gets to 25,000 people, the Obama administration will owe the public a response. I’ll report on it, and whether or not it’s satisfactory, right here.

Administrative Agencies Are Not a Power Unto Themselves

Cato legal associate Trevor Burrus co-authored this blogpost.

Administrative agencies are accorded huge deference — too much deference — by the courts. Acting as police, prosecutor, judge, jury, and executioner, agencies increasingly act as a law unto themselves and do a majority of the federal government’s work.

Through this arrangement, Congress is put in a win-win situation: the government can delegate decision-making to agencies and avoid political accountability. Because of these concerns, it is vitally important that courts’ deference to agencies not go too far.

In Christopher v. SmithKline Beecham Corp., two former pharmaceutical sales representatives sued to recover overtime pay. The Fair Labor Standards Act, however, exempts “outside salesmen” from overtime requirements and for over 70 years a Department of Labor rule has broadly defined “outside salesman” to include those who perform any part of the work required to sell goods. Pharmaceutical companies, as well as many other businesses, have long organized their business practices around this rule.

When former pharmaceutical employees brought a similar suit in the Second Circuit, the Secretary of Labor filed an amicus brief explaining that the rule would be thereafter changed not to exclude pharmaceutical employees. The Second Circuit deferred to this ad hoc rule change and held for the plaintiffs.

In Christopher, however, the Ninth Circuit refused to defer to the Labor Department’s attempt to change a long-standing rule. Cato thus joined the Washington Legal Foundation and the Allied Educational Foundation on an amicus brief to advise the Court that the Ninth Circuit was, believe it or not, correct. As the Ninth Circuit said, an “about-face regulation, expressed only in ad hoc amicus filings” does not deserve even the broad deference already accorded to agencies. Moreover, we stress that, if such deference were allowed, it would encourage agencies to avoid the regular rulemaking procedures that allow affected parties to give “notice and comment” on the proposed changes.

Administrative agencies should not be allowed any more leeway to increase their often unreviewable power.

The IRS Can’t Overrule the Supreme Court

Since the foundational administrative law case of Chevron v. Natural Resources Defense Council (1984), courts have given significant deference to executive agency interpretations of federal law. United States v. Home Concrete & Supply tests whether there are any meaningful limits on such deference.

The case involves a group of taxpayers who initiated a number of transactions designed to reduce their tax liability by allowing a financial entity they created, Home Concrete, to increase its tax basis and reduce its taxable gain from the sale of certain assets. In June 2003, the IRS ruled that the taxpayers’ use of Home Concrete in this way was improper and issued an adjustment to their tax return (requiring payment of back-taxes). Having missed the standard three-year limit for such actions, however, the IRS argued that the adjustment was timely under a tax-code provision that extends the statute of limitations to six years if the taxpayer “omits from gross income an amount properly includible therein which is in excess of 25 percent of the amount of gross income stated in the return.”

Despite the Supreme Court’s having long ago held otherwise, Colony v. Commissioner of Internal Revenue (1956), the IRS argues that an overstatement of basis qualifies as an omission under that tax provision. Further, during the course of this litigation, the Treasury Department issued a new regulation “clarifying” the provision in a way that supports the IRS’s argument. The IRS now argues that this new regulation is controlling and should be retroactively applied to Home Concrete’s 1999 returns.

After (mostly) winning at the district court, the IRS lost before the Fourth Circuit and asked the Supreme Court to review the case—which involves one of many similar applications of the relevant tax provisions. The Court took the case and now Cato has joined the National Federation of Independent Business on an amicus brief supporting the taxpayers, arguing that sanctioning this sort of ad hoc rule-making would undermine the rule of law and the separation of powers.

We note that “[t]he government’s position is that this regulation is due judicial deference” but the Supreme Court has “consistently held that where a statute has an unambiguous meaning, an agency’s contrary interpretation is not entitled to deference.” As Judge J. Harvie Wilkinson noted in his Fourth Circuit concurrence, “agencies are not a law unto themselves” and the government’s position in this case “seems to [be] something of an inversion of the universe and to pass the point where the beneficial application of agency expertise gives way to a lack of accountability and a risk of arbitrariness.”

In deciding Chevron, the Supreme Court surely never intended to undermine the very structure of the Republic and unleash an administrative state wholly a law unto itself.

The Supreme Court will hear United States v. Home Cincrete & Supply on January 17.

Podcast: How States Can Shut Down ObamaCare

Here’s a podcast on how states can shut down ObamaCare.

And here are links to additional material, including an op-ed that provides an overview, a blog post about Sen. Orrin Hatch (R-UT) getting involved, a blog post on how presidential candidates could get involved, and finally a blog post on what the Obama administration has to say about all this.