Real Clear Markets

The Legal Challenges to Obamacare Are Absurd

Opponents of the Affordable Care Act (ACA) think that popular opposition to the individual mandate and distress over the law's rocky rollout will carry them to big political gains in November. Polls currently indicate that they may win their bet.

But maybe not. Enrollment is picking up. After a messy start, enrollment targets have been met. Furthermore, most aspects of the law, other than the individual mandate are quite popular. So, we won't know whether opponents of the ACA win their bet, certainly until after the 2014 midterm elections and maybe not until after the 2016 presidential election.

Meanwhile, taking no chances, opponents are trying once again to win in the courts what they have not, at least so far, been able to win at the ballot box and they are resorting to a pretty wacky legal argument. In four separate cases they are arguing that Congress, which spent a year crafting and enacting a law that requires most Americans to carry health insurance and that provides financial aid to help them afford it, did not actually authorize that aid in most of the nation.

Sounds crazy, doesn't it? And it is. When they were debating the Affordable Care Act, every member of Congress—and everyone else, as well—understood that the proposed law would require people either to have health insurance or to pay a penalty if they did not. Everyone also understood that without financial help, many people couldn't afford adequate insurance. To make insurance affordable, everyone also understood that the proposed law would give tax credits to people with modest incomes. Opponents didn't like the bill, but they understood it. So did proponents.

And they understood why the law was crafted in the way that it was. The mandate requiring people to buy insurance went hand-in-hand with the requirements that insurers sell insurance to all comers and with the provisions that barred insurers from charging extra premiums because people had preexisting conditions. Without the credits, the mandate to buy insurance would be perverse—"you have to buy something we know you can't afford." And without the mandate, the insurance reforms would unenforceable because people would have every incentive to wait to buy insurance until they got sick when they could buy insurance, however sick they might be, at the same premium they would face when well. Their bills then would be sky high. Insurance companies face a suicidal choice. They could set premiums high enough to cover the huge bills of sick people, which virtually no one could afford—after all, avoiding financial ruination is one of the major reasons why people buy health insurance. Or they could keep premiums affordable and go broke. Neither option was thinkable. So, the health reform law was crafted to avoid, not to ensure, such bizarre choices.

Alas, the wording of the final law was less than precise and permitted misinterpretation. The law authorizes the payment of tax credits for health plans selected through ‘an Exchange established by a state.' The ACA did not require states to set up exchanges, however and only seventeen have done so. Among the ten most populous states in the nation, only four have done so.

ACA opponents jumped. If a state has not set up an exchange, they argued, subsidies cannot be paid. Under this interpretation, the Affordable Care Act would be instantly transformed from a law that has an internal logic into one that has none.

Now, let's take a step back. The ACA clearly and explicitly authorizes the federal government to act on behalf of the states that elect not to establish exchanges. It requires people in all states to carry health insurance and to pay a penalty if they do not. The law requires insurers in all states to sell coverage to anyone who wants to buy it and prohibits insurers in all states from basing premiums on preexisting conditions. That is why Congress intended that the provision requiring people to carry insurance apply in all states.

So, what ACA opponents are arguing in these four cases boils down to this: not only did Congress require people in all states to pay a penalty unless they bought insurance many could not afford without financial help but it also was willing to deny people in more than half of the states the means to make such a requirement meaningful. Even the most severe critics of Congressional dysfunction should find this sort of perversity too much to credit.

As Justice Scalia wrote in 1989: "Surely one of the most frequent justifications courts give for choosing a particular construction is that the alternative interpretation would produce ‘absurd' results, or results less compatible with the reason or purpose of the statute."

No defender of the ACA could put the point better about these legal challenges: absurd, indeed.