Rapid Response: Is Obamacare a Sinking Ship?


July 22, 2014 1:53PM

When Congress was scrambling to pass Obamacare back in 2010, they certainly made some missteps in the nearly 1,000 pages of text. One such misstep was to limit subsidies that Americans can receive for purchasing health insurance to plans purchased “through an exchange established by the state.” A smug president and Congress assumed that all states would set up their own exchanges—local type sites—so there would be no cause for concern. But now there is. Numerous states, including our own, accurately concluded that setting up a state exchange would be too costly and the strings attached by the federal government not worth the headache. So they left the Obama administration to set up its own exchanges in the states, where some 4.5 million Americans have now purchased health insurance. Back to that phrase about “exchange established by the state.” According to the plain language of the law, those purchasing insurance through a federal exchange do not qualify for subsidies, because the federal government is not at all a “state.” Despite the clear wording, the Obama administration realized the mistake and quickly acted to “correct” it via a unilateral rule passed by the IRS. In today’s decision, the D.C. Court of Appeals sided with common sense and the letter of the law, ruling that no subsidies can flow through federally-created exchanges like the one in Tennessee, and repudiating the executive branch’s attempts to just re-write laws duly passed by Congress. This means that without the subsidies, many of those purchasing insurance through cannot afford coverage, and may drop their plan altogether and pay the fine instead. The ability of the Obama administration to hook millions of Americans onto Obamacare relies considerably on the carrot represented by these subsidies. Without that carrot, enrollees simply get the stick. This isn’t the end of the road, but it’s a severe blow for Obamacare, and it has far greater implications for the future of the law than even the Hobby Lobby case a few weeks ago. The appellate court’s full panel can review the case and possibly overturn the ruling, but the decision definitely increases the probability that this issue will wind up before the U.S. Supreme Court. If the high court does its job, it will uphold the plain language of the statute, striking down the IRS rule. Let’s hope “what we meant to say was…” is not accepted as a viable excuse for one branch unilaterally changing the law passed by another. If it is, we have even bigger problems on our hands than Obamacare. -Justin Owen