Tag: jonathan adler

Halbig v. Burwell Winners Outnumber Losers by More than Ten to One

Today at DarwinsFool.com, I released estimates of the impact of a potential ruling for the plaintiffs in Halbig v. Burwell, one of four cases currently before federal courts claiming that the subsidies and taxes the IRS is implementing in the 36 states with health-insurance Exchanges established by the federal government are illegal. The Patient Protection and Affordable Care Act repeatedly says those taxes and subsidies are authorized only “through an Exchange established by the State.”

Left-leaning groups and media outlets that defend the IRS are attempting to portray a potential ruling for the Halbig plaintiffs as catastrophic, because it would put an end to the subsidies roughly 5 million individuals enrolled in federal Exchanges are currently receiving. As I explain in detail, those commenters ignore three crucial facts. One, a victory for the Halbig plaintiffs would increase no one’s premiums. It would merely stop the IRS from unlawfully shifting the cost of those overly expensive PPACA premiums from enrollees to taxpayers. Two, if federal-Exchange enrollees lose subsidies, it is because the courts will have found those subsidies are, and always were, illegal. And three, if the Halbig plaintiffs prevail, the winners in the 36 states with federal Exchanges would outnumber the losers by more than ten to one.

As I explain at Darwin’s Fool, here is what the IRS’s defenders don’t want you to know about the impact of a potential Halbig victory.

  • A Halbig victory would free more than 8.3 million individuals from the PPACA’s individual mandate. That’s how many people in those 36 states the IRS is currently subjecting to the individual-mandate tax without statutory authorization.
  • In the 36 states with federal Exchanges, a Halbig victory would free 250,000 firms and 57 million employees from the PPACA’s employer mandate. That’s how many people the IRS is unlawfully subjecting to the employer mandate.
  • The number of winners under a Halbig victory is therefore more than ten times larger than the 5 million people who would lose an illegal subsidy.
  • Those 5 million people are “losers” not because they were deprived of an illegal subsidy. Regardless of one’s position on the PPACA, we can all agree that courts should put an end to illegal government spending whenever they can. Those people are “losers” because the Obama administration recklessly induced them to purchase overly expensive Exchange coverage with the promise of billions of dollars in subsidies that it has has no authority to offer, and that could disappear with a single court ruling.

I also provide state-level estimates of the number of firms and individuals Halbig would free from these mandates. For example:

  • A Halbig victory would free nearly 1 million Floridians from the individual mandate, and more than 16,000 firms and 5.1 million Floridians from the employer mandate.
  • It would free more than 1.5 million Texans from the individual mandate, and free more than 24,000 firms and nearly 7 million Texans from the employer mandate.
  • A Halbig victory would also enable the 14 states (plus D.C.) that established Exchanges to exempt residents and employers from those mandates by switching to a federal Exchange, as well as create political and economic incentives for states to make the switch.
  • If the Halbig plaintiffs prevail, the 14 establishing states (plus D.C.) could cumulatively exempt 3.8 million residents from the individual mandate and exempt 123,000 firms and nearly 29 million residents from the employer mandate.
  • California, for example, could exempt 1.7 million residents from the individual mandate, and exempt 32,000 firms and 9.4 million workers from the employer mandate.
  • Though those states would lose Exchange subsidies if they switched to a federal Exchange, the much larger number of firms and residents who would benefit could still pressure state officials to make the switch.
  • These states could also experience economic pressure to switch to a federal Exchange, because the employer mandate (which increases the cost of doing business) will be operative in their states but not in states that opt for a federal Exchange. Establishing states could therefore lose jobs to federal-Exchange states, unless they become federal-Exchange states themselves.

Click here for state-by-state data on the impact (or potential impact) of a Halbig ruling.

Tax Notes Praises Law-Review Article that Got Halbig Cases Rolling

A panel of the U.S. Court of Appeals for the D.C. Circuit, which is often referred to as the second-highest court in the land, is expected to rule any day now on Halbig v. Burwell, a legal challenge that “may actually crush,” “kill,” and “wreck” the Patient Protection and Affordable Care Act, a.k.a. Obamacare.

The tax-law journal Tax Notes has chosen the law-journal article that got Halbig and similar cases rolling – Jonathan H. Adler and Michael F. Cannon, Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA, Health Matrix: Journal of Law-Medicine 23, No. 1 (2013): 119-195 – as one of “the 10 law most noteworthy law review articles on employee benefits and executive compensation issues published in 2013 that a broad audience of employee benefits professionals would find relevant and worthy of attention.” Tax Notes calls the Adler-Cannon article “innovative and thought provoking” and one that “practitioners should have read” in 2013.

To read the Adler-Cannon Health Matrix article, click here. For more on the Halbig cases, click here.

ObamaCare’s Exchanges Perform More than a Dozen Functions Besides Issuing Subsidies

One of the issues underlying Halbig v. Sebelius and three similar lawsuits making their way through federal courts is whether Congress intentionally restricted the Patient Protection and Affordable Care Act’s (PPACA) private health-insurance subsidies to individuals who buy coverage through state-established exchanges. If so, that would mean the Internal Revenue Service’s decision to issue subsidies in the 34 states that did not establish exchanges (i.e., that have federally established exchanges) is illegal. For more on the IRS’s attempt to rewrite the PPACA in this fashion, click here.

On Twitter, a skeptic challenges my coauthor Jonathan Adler claim that Congress intended to withhold subsidies in states that did not establish exchanges, arguing “The exchanges serve no purpose at all absent subsidies. Is there no golden rule at all in American jurisprudence?” (Read the entire exchange here.)

In legal jargon, the skeptic argues that a literal interpretation of the statutory language restricting subsidies to those enrolled “through an Exchange established by the State” would be absurd, and the courts should defer to the agency’s reasonable interpretation.

Exchanges, however, are regulatory bureaucracies that perform other functions and serve other purposes besides dispensing subsidies, as the PPACA’s authors and the president acknowledged. In 2009, President Obama said that health insurance exchanges “would allow families and some small businesses the benefit of one-stop-shopping for their health care coverage and enable them to compare price and quality and pick the plan that best suits their needs.” Senate Majority Leader Harry Reid (D-NV) said PPACA “guarantees real choice and competition to keep insurers in check… By creating strong competition, we’ll reduce skyrocketing health care costs.” The PPACA’s Senate drafters wrote, “Insurers that jack up their premiums before the Exchanges begin will be excluded–a powerful incentive to keep premiums affordable.”

In fact, the exchanges are supposed to perform more than a dozen functions besides issuing subsidies. Here are some of the ways PPACA’s health insurance exchanges attempt to serve the goals of “one-stop shopping,” price and quality comparisons, expanding choice and competition, and reducing health insurance premiums, even in the absence of subsidies:

Resources for a Potential Ruling Today in Halbig v. Sebelius

The D.C. Circuit is due to rule any day now, quite possibly today, on Halbig v. Sebelius. For those who haven’t been watching the vigil I keep over at DarwinsFool.comNewsweek calls Halbigthe case that could topple ObamaCare.”

First a little background. The Patient Protection and Affordable Care Act offers refundable “premium-assistance tax credits” to qualified taxpayers who purchase health insurance “through an Exchange established by the State.” The PPACA contains no language authorizing tax credits through the 34 Exchanges established by the federal government in states that declined to establish one themselves, nor does it authorize the Internal Revenue Service to treat those federally established Exchanges as if they had been “established by the State.” Offering benefits only in compliant states was proposed by numerous Republicans and Democrats in 2009, for obvious reasons: Congress cannot force states to implement federal programs, but it can create incentives for states to act, such as by offering health-insurance subsidies to residents of compliant states.

Halbig is one of four cases challenging the IRS’s decision to rewrite the statute and offer tax credits in the 34 states with federal Exchanges. The plaintiffs are individuals and employers who are injured by the IRS’s overreach because, due to the PPACA’s many inter-locking pieces, issuing those illegal tax credits subjects them to illegal penalties.

Since a ruling may come today (or some Tuesday or Friday hence, as is the D.C. Circuit’s habit), here are some materials for those who want to hit the ground running.

Update: The D.C. Circuit has handed down rulings for today, and Halbig is not among them. Click here to check on the court’s most recent rulings.

The Wall Street Journal on Halbig v. Sebelius

Today, the U.S. Court of Appeals for the D.C. Circuit will hear oral arguments in Halbig v. Sebelius, one of four cases that Jonathan Adler and I helped spur with our 2013 Health Matrix article, “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.” Critics call Halbig the most significant existential threat to the Affordable Care Act.” In anticipation of the hearing, the Wall Street Journal wrote a lengthy editorial explaining the issues. Excerpts:

Halbig v. Sebelius involves no great questions of constitutional interpretation. The plaintiffs are merely asking the judges to tell the Administration to faithfully execute the plain language of the statute that Congress passed and President Obama signed.

The Affordable Care Act—at least the version that passed in 2010—instructed the states to establish insurance exchanges, and if they didn’t the Health and Human Services Department was authorized to build federal exchanges. The law says that subsidies will be available only to people who enroll “through an Exchange established by the State.” The question in Halbig is whether these taxpayer subsidies can be distributed through the federal exchanges, as the Administration insists…

In 2012, HHS and the Internal Revenue Service arrogated to themselves the power to rewrite the law and published a regulation simply decreeing that subsidies would be available through the federal exchanges too. The IRS devoted only a single paragraph to its deviation from the statute, even though the “established by a State” language appears nine times in the law’s text. The rule claims that an exchange established on behalf of a state is a “federally established state-established exchange,” as if HHS is the 51st state.

Careful spadework into ObamaCare’s legislative history by Case Western Reserve law professor Jonathan Adler and Michael Cannon of the Cato Institute has demonstrated that this jackalope rule-making was contrary to Congress’s intent…

Mr. Obama has conceded that “obviously we didn’t do a good enough job in terms of how we crafted the law.” The right and only lawful way to repair ObamaCare is through another act of Congress. In Halbig, the judiciary can remind the Obama Administration of this basic constitutional truth.

Jonathan Adler critiques the Halbig district court’s ruling in favor of the IRS here.

Find lots of commentary by me on the Halbig cases at DarwinsFool.com.

This reference guide contains all the information you could want about these cases – and more.

Guess Who’s One of the Hill’s ‘100 People to Watch This Fall’

I guess I’ll have to tout this myself. Last week, the Hill newspaper put me on its list of “the 100 people you can’t ignore this fall if you’re wondering how events in Congress and the White House will play out.” Here’s the write-up

Michael Cannon Director of health policy studies at the Cato Institute
 
Think the Supreme Court has settled the question of ObamaCare’s legality? Not if Cannon has anything to say about it. Cannon is a tireless advocate for the argument that the IRS has illegally implemented the healthcare law’s insurance subsidies, which will help low-income households cover the cost of their premiums. 
 
His argument is that healthcare law, as written, does not allow for the subsidies to be used in healthcare marketplaces that are set up by the federal government.
 
He helped the state of Oklahoma file a lawsuit against the subsidies, and a group of small businesses filed a separate suit on the same grounds, in case Cannon’s runs into procedural roadblocks.
 
If the lawsuits Cannon has spearheaded are successful, they could have a devastating impact on the healthcare law. A final decision in favor would stop the flow of tax subsidies to people in more than half of the states, making ObamaCare far less attractive to consumers and stripping away much of the law’s promise of affordability.

Corrections and amplifications. The argument is as much Jonathan Adler’s as mine; we develop it together in this law-journal article. The argument is not that the IRS is illegally implementing otherwise lawful subsidies; it is that the IRS is trying to dispense some $700 billion in illegal subsidies that Congress expressly did not authorize, and impose illegal taxes on millions of employers and individual Americans starting in 2014; that the Obama administration is attempting to tax, borrow, and spend nearly $1 trillion without congressional authorization. Finally, I am neither a party nor counsel nor financier to either Pruitt v. Sebelius or Halbig v. Sebelius.

Harvard Health Policy Review on the IRS’s Illegal ObamaCare Taxes

In the just-released Spring 2013 issue of Harvard Health Policy Review, I have an article titled “ObamaCare: The Plot Thickens.” The article examines the IRS rule that purportedly implements ObamaCare’s tax credits, but actually violates that statute by taxing, borrowing, and spending hundreds of billions of dollars contrary to Congress’ explicit instructions. (The article is a less-technical version of my Health Matrix article (coauthored with Jonathan Adler), “Taxation Without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA.”) Here’s an excerpt:

In broad daylight, the Internal Revenue Service is attempting to tax, borrow, and spend [roughly] $800 billion—contrary to both the express language of the PPACA and congressional intent. Thus in addition to other abuses that have recently come to light, the IRS is attempting to tax millions of employers and individuals without congressional authorization…

In this still-unfolding narrative, the Obama administration’s actions are triply anti-democratic. First, the IRS is violating a direct constraint that popularly elected legislators placed on the executive branch. Second, it is violating that duly enacted statute for the purpose of denying popularly elected state officials the vetoes Congress gave them over certain provisions of the statute. And third, it is violating the statute because administration officials either cannot fathom or will not accept that Congress meant to do what it clearly did.

Obama administration officials continually emphasize that the PPACA is “the law of the land.” That remains to be seen, in more ways than one.

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