Okla. Dist. Ct. Follows DC Cir., Strikes Down Obamacare Subsidies

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By Mark Wilson, Esq. on September 30, 2014 2:29 PM

Hot on the heels of decisions from the D.C. Circuit Court of Appeals and the Fourth Circuit, the U.S. District Court for the Eastern District of Oklahoma ruled today that Obamacare subsidies aren't available to residents of states that didn't establish their own state-run exchanges.

If you'll recall, there was a teensy bit of controversy over the Affordable Care Act. Republican-leaning states -- including Oklahoma -- opted out of running their own state insurance exchanges, meaning the federal government had to step in to operate the exchanges.

To the Emergency Room With You

In order to make health care affordable for poorer people, the ACA, through an IRS regulation, allows for tax subsidies to offset the cost of insurance premiums. But in their continuing and bizarre quest to ensure that poor people will not be able to access affordable health care, those same states argue that subsidies are available only in states where the states themselves run the exchanges. "Hello, my name is Oklahoma, and I don't want my citizens to get subsidies for health care. I want them to have to pay full price."

Standing to Stand On

At the outset of the current Oklahoma case, the federal government argued that the State of Oklahoma didn't have standing, as it suffered no injury through either the tax subsidy (which is between a taxpayer and the federal government) or the "employer mandate," which requires payments by employers who would otherwise be required to provide health insurance, but don't, and whose employees purchase insurance from a state exchange. (This, like the tax subsidy, would seem to be between the employer and the federal government.)

Ah, but because Oklahoma hasn't established an exchange, state employees would have to resort to a federal government-run exchange, and the State of Oklahoma would be required to make the employer payments like any other employer. Sneaky move, Oklahoma!

But the fact remains that the State of Oklahoma already offers health insurance to state employees. This means state employees don't have to resort to an exchange, and the State doesn't need to pay anything. Oklahoma contended that its definition of "full time" is different from the ACA's definition -- meaning that the State doesn't provide insurance to some employees that the ACA would require it to provide insurance to. As a result, these employees have to resort to a state insurance exchange.

Even if that weren't the case, looking to a recent Liberty University suit, the court said the State would be damaged because "it may well incur additional costs because of the administrative burden of assuring compliance with the employer mandate."

Moving on to the Merits...

All three courts to address the merits of this claim, including the Oklahoma district court, concluded that the statute was ambiguous. An exchange established by a state could mean either that it was directly established the state, or established on behalf of the state by the federal government. This court sided with the D.C. Circuit Court's reasoning in Halbig v. Burwell -- for no other reason, apparently, than that it wanted to (even though the panel decision has been vacated because the court decided to rehear the case en banc).

The court concludes by insisting that it's just calling balls and strikes: "[C]ourts, out of respect for their limited role in tripartite government, should not try to rewrite legislative compromises to create a more coherent, more rational statute. A statute is not 'absurd' if it could reflect the sort of compromise that attends legislative endeavor." Then again, it's a canon of statutory interpretation that laws should be read so as to give them effect.

And it's not clear that the ambiguity in the ACA provision at issue reflects what should be a legislative compromise. The court here agreed with the other two circuits that the legislative history of this provision is so vacant as to be unhelpful: No one really knows what Congress intended. Does that mean that this provision -- which affects almost 60% of uninsured Americans -- must be scrapped? We'll see what the Tenth Circuit thinks.

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