What Will Obama Do if He Loses King v. Burwell?

Rather than retread the ground Michael Cannon ably covered yesterday regarding President Obama’s healthcare speech – short version: we’re all in this together, so if you’re against Obamacare, you’re for letting people die in the streets – I want to look ahead to what our fearless leader will do if the government does indeed lose King v. Burwell.

We’ve famously been told that the Department of Health & Human Services has no Plan B. But what if the Supreme Court forces the executive branch’s hand? Yes, there’ll be plenty of finger-pointing and demagoguery as a high-stakes game of chicken unfolds among the White House, Congress, and various state governments. But what could Obama/HHS do? Remember, this is the president who has a pen and a phone, and “if Congress won’t act, I will.”

The running joke is that HHS/IRS will simply promulgate another rule deeming all federal exchanges to be state exchanges. But that couldn’t possibly be the answer, could it?

Actually, that’s an option, as described by Josh Blackman, co-author of Cato’s amicus brief in the case, in a new paper he wrote for the Federalist Society titled “The Legality of Executive Action after King v. Burwell.” Here’s the scenario:

HHS could determine that the fourteen states that declined to establish an exchange, but continued to perform certain regulatory activities that overlap with the ACA [what is known as “plan management”] have in effect established an exchange. As a result, consumers in these states could continue to receive subsidies. This approach would be inconsistent with the ACA, and disregard the choices the sovereign states made not to establish an exchange. If HHS issued such regulations—likely without notice and comment—it would amount to an end-run around an adverse ruling in King v. Burwell, and open the door to future litigation.

In other words, HHS would consider some states to have established exchanges without knowing it. Such an action would “distort political accountability and disregard the considered judgment of the sovereign states,” but hey, we’re all in it together, right? The clever lawyers who came up with the after-the-fact justifications for the IRS rule regarding federal subsidies in states lacking “exchanges established by the state” could surely come up with some legalistic language to justify such a radical move. Note that of the 14 states that currently perform certain “plan management” functions, seven have a “state-partnership exchange” (AR, DE, IL, IA, MI, NH, and WV) and seven have a “federally facilitated exchange” (KS, ME, MT, NE, OH, SD, and VA). All of these states explicitly disclaimed setting up their own exchanges and lack the “State law or regulation” required by the ACA of all state exchanges.

Another option would be for HHS to streamline the gauntlet states currently have to run to set up exchanges:

Under the current regime, it is impossible for a state to establish an exchange this quickly [before the end of 2015]. However, HHS may alter the guidelines in the Blueprint to expedite the process. As a report for the National Academy of State Health Policy observed, “It is possible that HHS might revisit, allow for phased compliance, or otherwise adapt these requirements in light of King to allow for state exigencies.” Because the states are attempting to work with HHS, the federal government would have more leeway to streamline the establishment of exchanges. Though at bottom, the state still must take specific actions to actually establish an exchange, rather than just deeming the federal exchange as a state-based exchange. 

One problem here is that 18 of the 34 states at issue passed Healthcare Freedom Acts, which prevent state officials from taking any actions that enforce Obamacare’s penalties. In some of the other states, (mostly Republican-controlled) legislatures would have to act to enable even the newly streamlined path to state exchanges. Perhaps in a handful, governors would be able to establish exchanges via executive order, but it’s unclear whether HHS action would be of any moment in any such decision.

Finally, the Justice Department could take the position that King’s scope is limited to the four named plaintiffs in the case. While this bizarre tactic was suggested by otherwise levelheaded University of Chicago law professor Will Baude in the New York Times, it really belongs in the realm of the trillion-dollar platinum coin that was floated (and rejected by Obama) as a possible solution to the debt-ceiling debate several years ago.

In all of these scenarios, the litigation would be titanic, but the Supreme Court would presumably not take kindly at the government’s attempted end-run around its ruling. We can presume that the government would lose, at least with the current composition of justices. But it will have extacted a political cost on its enemies, who will presumably be seen as trying to stop the subsidies that the administration is valiantly trying to preserve. Of course, that’s what was said about King v. Burwell in the first place.

So we really are back to square one. President Obama can try to run out the clock on his administration, kicking the ultimate resolution of this mess to his successor, but at the end of the day there really is no legal administrative plan B: only Congress can fix the mess it created when it passed Obamacare more than five years ago. As Josh says, “If the ACA is to succeed, it will be based on a partnership between the states and federal governments, complying with the law Congress drafted.” 

It’s all such a shame because it didn’t have to come to this, weakening and gumming up the healthcare system overall just to get a few more people covered (while driving up overall costs and slowing the economy). The ACA is the only major federal program, the only new social-welfare architecture, that was rammed through Congress on a partisan basis and against the obvious will of the people.

The people have tried valiantly to get rid of it, of course – even in 2012, when Obama was reelected, more Americans opposed the law than supported it – and they may get another opportunity in 2016. To that end, I look forward to Josh’s next paper, on the various political scenarios that could play out the day after victory in King through the presidential election.