The case of Halbig v. Burwell (formerly Halbig v. Sebelius), in which plaintiffs are attempting to void Affordable Care Act subsidies in states that didn't set up their own healthcare exchanges, was and remains a fundamentally dishonest solicitation of right-wing judicial activism.
But that doesn't mean right-wing judges won't accept the invite, potentially devastating ACA marketplaces across the country. And on Tuesday, two Republican-appointed judges on the U.S. Circuit Court of Appeals for the District of Columbia drew up RSVPs, creating a template that the conservative majority on the Supreme Court may ultimately follow.
An adverse ruling would be devastating to the law itself. But the politics of a victory for conservatives would be anything but predictable.CHART: How the New Obamacare Ruling Would Hurt Americans' Wallets
A majority on the three-judge panel essentially held that phrases read out of context in a section of the ACA statute "unambiguously" prohibit the IRS from subsidizing insurance plans in states that didn't set up their own exchanges. That's what the originators of the suit wanted them to do. But it required those judges to ignore no less a conservative than Supreme Court Justice Antonin Scalia, who last month described the “fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.”
From that view, I'd argue that the statute is unambiguous. Insurance subsidies are valid in every state, regardless of which entity set up a particular state's exchange. Sloppiness aside, there's no ambiguity about the law's "overall statutory scheme." Other parts of the law make clear that its drafters contemplated subsidies in every state. This lower court judge agrees. You could make an argument that it's ambiguous, but that wouldn't doom the ACA either. Courts are obliged to apply a two-part test known as the Chevron test in cases like these. At step one, they determine whether the statute has any ambiguity to it. If not, then the government must do what the law clearly states. If the statute is ambiguous, then judges must determine whether the government's interpretation of the law is plausible. But once you've reached this step, the administration's interpretation is clearly plausible. That's what the Fourth Circuit Court of Appeals held (PDF) just over an hour after the D.C. Circuit released its ruling.
What the challengers have asked judges to do is to ignore the "fundamental canon" and buy into the idea that the Democrats who passed the law unambiguously structured it to withhold premium subsidies from states that refused to set up their own exchanges, as some sort of high-stakes inducement. This is plainly false. It's the giant whopper underlying the entire theory of Halbig. A completely fabricated history of the Affordable Care Act, which treats the scores of reporters who covered the drafting of the law as idiots, and the aides and members who actually drafted it as bigger idiots and liars as well.
Which is why I've always assumed that the challenge will ultimately fail. It will almost certainly fail this fall, in an en banc ruling of the entire Circuit Court, and perhaps later before the Supreme Court. But at least two Circuit Court judges were willing to buy into the lie for the purpose of derailing Obamacare, which raises the question of what happens if Chief Justice John Roberts decides to cripple the law just a few years after rescuing it.
There's no use sugarcoating it: An adverse Supreme Court ruling would throw the ACA into chaos in three dozen states, including huge states like Florida and Texas. The vast majority of beneficiaries in those states would be suddenly unable to afford their premiums (and might even be required to reimburse the government for unlawful subsidies they've already spent). Millions of people would drop out of the insurance marketplaces. Premiums would skyrocket for the very sick people who need coverage the most.
But that's where the conservatives' "victory" would turn into a big political liability for red- and purple-state Republicans. An adverse ruling would create a problem that could be fixed in two ways: With an astonishingly trivial technical corrections bill in Congress, or with Healthcare.gov states setting up their own exchanges. If you're a Republican senator from a purple Healthcare.gov state—Wisconsin, Pennsylvania, Nevada, North Carolina, Florida, Ohio, and others—you'll be under tremendous pressure to pass the legislative fix. If you're a Republican governor in any Healthcare.gov state, many thousands of your constituents will expect you to both pressure Congress to fix the problem, and prepare to launch your own exchange.
Conservatives would like to believe that they could just leave something as deeply rooted as Obamacare permanently hobbled, or that they could use the ensuing chaos as leverage, to force Democrats to reopen the books, and perhaps gut the law in other ways. I think they're miscalculating. Just as government shutdowns and debt default threats don't create leverage because the public doesn't support inviting chaos in pursuit of unrelated goals, I don't think an adverse ruling in Halbig will create leverage for the GOP.
But it would needlessly create significant hardship for millions of people. If Congress didn't act, and red-state governors threw their middle- and low-income constituents under the bus, they'd saddle the country with a two-tiered health care system, in which residents of blue states have functioning insurance markets and near-universal coverage, and residents of red states are consigned to dysfunction and high rates of uninsurance. Which is another reason it probably won't happen. But Congress should just fix the problem now, just to be sure. There's no responsible reason not to.