Recently, George Will wrote an interesting column outlining one of the legal arguments against the Affordable Care Act. Unlike many of the more famous legal challenges, this one is not based on the Constitution but on the wording of the law itself. This argument, if successful–it is currently working its way through the courts–would not strike down the law as a whole, but it might make it unworkable and force Congress to revisit it.
As Will explains, the law will only work correctly if a lot of people sign up for health insurance. Thus Congress included the individual mandate to induce people to sign up. But since insurance costs money, Congress also included in the law subsidies to assist people in paying for their insurance coverage. The law specifies that such subsidies will be available to those who purchase health insurance in an insurance exchange “established by the state.” Those are the four possibly deadly words: established by the state.
Here is the problem. While many Americans will have signed up for health insurance in the state exchanges, and so will be eligible for subsidies, many others will have signed up in the exchange established by the federal government, and so will not be eligible for such subsidies. Or at least they shouldn’t be, if the language of the statute is respected.
The IRS has tried to solve this problem for the Obama administration by interpreting the language of the law to include people in the federal exchange, but this is a pretty big stretch. As far as I, at least, have been able to observe, in the language of American law the term “state” almost always refers to a state government. Usually the federal government is referred to in terms that would be pretty unmistakable: the “federal government,” the “government of the United States,” or just the “United States.” Indeed, if the language really meant to refer to a federal exchange established pursuant to the law it would almost certainly have referred to an exchange “established by the Department of Health and Human Services.” At any rate, the wording is sufficiently at variance with what the IRS is doing that it permits a plausible legal challenge to a large part of the subsidies that the government will be dispensing.
And if the federal courts accept the argument posed by this legal challenge, it will cause a big problem for the administration, since it will leave a lot of Americans required to purchase health insurance but without the help of subsidies.