Two Lawsuits Could Strike New Blows to the ACA

Decisions in two important court cases involving the Affordable Care Act are expected soon and could have a dramatic impact on the future of the health overhaul law.

One case is before the U.S. Supreme Court involving the law’s affront to religious liberty.  The other is before the influential D.C. Circuit Court, challenging the Obama administration’s decision to allow taxpayer subsidies for health insurance to flow through federally-created health insurance exchanges.

If the government loses in one or both of these suits, it will ignite fresh challenges to the administration’s liberal and even extra-legal implementation of the statute. And this in turn would give Congress a stronger basis for legislation to rein in the administration and chart a new path for health reform going forward.

Challenge to religious liberty

In interpreting the ACA, the Department of Health and Human Services mandated that employee health care coverage must include contraception, sterilization procedures and potentially abortion-causing drugs.  The Supreme Court heard arguments on March 23 as Hobby Lobby and Conestoga Wood challenged the HHS mandate and its violation of their owners’ religious beliefs about the sanctity of human life.

More than 2,500 religious leaders from many denominations have sent letters to President Obama objecting to the mandate, asking the administration “to protect the conscience rights of all people who have moral or religious objections to covering contraceptives and sterilization procedures.”

The Obama administration pretends it softened its original version of the HHS mandate. It devised a shell game that tried to shift funding for the mandate to insurance companies, but ultimately the employer would still pay because the cost would be buried in higher premiums.

The government contends that the religious views of the owners of a private business are not relevant, and therefore they do not have a right to get an exemption from the law, as churches do.  That means companies, such as Hobby Lobby and Conestoga Wood, would be required to provide access to these services to their employees in violation of their religious beliefs.

More lawsuits are being filed challenging the mandate, chronicled by the Becket Fund for Religious Liberty.  The Archdiocese of Philadelphia and its Catholic Charities affiliates sued three federal agencies on June 2 seeking relief from the federal mandate.  The diocese is the 50th non-profit organization — including 17 individual dioceses and archdioceses — to file suit seeking an injunction on the regulations.

A decision is expected this month from the Supreme Court.

Challenge to federal subsidies in federal exchanges

On the same day as the Supreme Court hearing in March, D.C. Court of Appeals Judge Thomas. B. Griffith presided over arguments in Halbig v. Sebelius over whether subsidies for health insurance can flow through federal as well as state exchanges.

Sec. 1311 of the Affordable Care Act says that health insurance subsidies are available only “through an exchange Established by the State.”  The IRS, however, interpreted the statute to mean that the subsidies also could be distributed in the now 36 states where the federal government is operating exchanges.

During the arguments, Judge A. Raymond Randolph indicated he felt the statute was quite clear in repeating “seven times” in that section that the subsidies are available only if the state sets up its own exchange.

During the D.C. Circuit arguments, there was a great deal of discussion about legislative intent, with Judge Harry T. Edwards seeming to side with the government in saying that Congress’ overall intent to deliver subsidies should prevail.

The Galen Institute submitted an Amicus brief focusing on the crucial issues of federalism the cases raises:

Because health insurance is traditionally within the province of State—not federal—regulation, the IRS’s interpretation of the relevant statutes violates the rule that “if Congress intends to alter the ‘usual constitutional balance between the States and the Federal Government,’ it must make its intention to do so ‘unmistakably clear in the language of the statute.’ Gregory, 501 U.S. 452, 460 (1991).

A decision could come later this month, which could then be appealed. The D.C. Circuit is one of four federal courts – in Oklahoma, Indiana, and Virginia – considering challenges to the authority of the IRS to rewrite the statute and allow subsidies to flow through the federal exchanges.

What does this portend?

If those challenging the IRS interpretation should ultimately prevail, states could later set up an exchange so their citizens could get the subsidies since there is no deadline for a state to establish an exchange.  This would set up a new series of battles in the states much like those over Medicaid expansion.  Since only a few states have been able to set up a functional exchange, providing subsidies for health insurance surely would require fundamental changes to the law.

Speaker John Boehner has worked hard to get legislation passed through the House that attracts support from Democrats.  Should Republicans take the Senate in the 2014 elections, a number of these bills would likely pass the Senate and land on the president’s desk, where he would have to sign or veto them despite support from fellow Democrats.

A decision against the government in both or either case could strike a blow to the heart of the law, sending a strong message that the administration has gone far beyond its legal authority in interpreting and changing the law.  That would make it even more difficult for the administration to continue to make extra-legal changes in the future.

Losing one or both lawsuits would further weaken the president’s desperate attempt to rescue this law, further expose its fundamental dysfunctionality, and clear a new path for Congress to intervene with new legislation to give people more choices than the ACA’s straightjacket.


Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on ideas for market-based health reform.

Morning Consult