A vital challenge to Obamacare will be heard in the Supreme Court this spring. This case is mainly about the states that surprised the White House by opting out of setting up state insurance exchanges, and Texas will be front and center.
The case is also about inconvenient reality and whether the White House rewrote the health care law when it learned that a problematic number of states were refusing to accept the role planned for them in the health care overhaul. The entire scheme relied upon states volunteering to establish exchanges in return for premium subsidies for qualified subscribers. Texas was one of the first states to refuse. Then-Gov. Rick Perry described the plan as treating “states like subcontractors through which the federal government can control the insurance markets.”
Jonathan Gruber, the chief salesman of Obamacare, is well known for confirming that if states didn’t set up exchanges, “that means your citizens don’t get their tax credits,” but he also revealed that the federal government would use “the ultimate threat” of “millions and billions of dollars” going to other states “if your governor doesn’t set up an exchange.”
When a majority of states stalwartly refused full-blown exchanges, having learned that the future costs and heavy hand of the federal government were not worth the inducements, Gruber said that the federal government’s “backstop” action to bring in federal exchanges would still provide subsidies for state participants.
Ultimately, when states still refused the exchanges, IRS tax code was written to provide for premium subsidies and the connected employer mandates through federal exchanges. A Wall Street Journal article suggests that subsidies and employer penalties were imposed on the opt-out states when the words “exchanges established by the state” were deleted from the IRS draft rule.
The Supreme Court will be deciding whether states that had the foresight and political courage to decline both the subsidies and the associated (but deferred) employer penalties could rely on the letter of the law to mean what it said.
Last June, the Supreme Court corrected the EPA when the agency rewrote terms of the Clean Air Act that “turn(ed) out not to work (for the agency) in practice.” The court said that the executive branch may not assume power beyond delegated authority “to resolve some questions left open by Congress.” When the executive jumps over congressional checks on power, the states have little protection against federal intrusion.
The health care overhaul transferred control of 1/6 of the state economies, with underlying police power, to the federal government despite the lack of public support for the initiative (42 percent at passage and 38.5 percent now). The absence of informed congressional deliberation, denial of public access to facts that comprised Obamacare, executive rewrites after Obamacare was issued, and the attachment of IRS-promulgated tax subsidies and employer penalties at issue in this lawsuit all compel the court to mind Chief Justice John Marshall’s instruction from 1805: “Where the general system of the laws is departed from, the legislative intention must be expressed with irresistible clearness.” In other words, the executive branch does not just get to make up law to force state cooperation.
Lugo is senior fellow at the Center for Tenth Amendment Action at the Texas Public Policy Foundation.