White House: It's business as usual on subsidies after Halbig

Another example of executive-branch lawlessness, or simply business as usual while an issue proceeds through the appeals process? The White House reacted to today’s Halbig decision by reassuring enrollees through the federal exchange that HHS would continue to pay their subsidies. But for how long?


The White House says health subsidies under the Affordable Care Act will continue to flow for the time being despite a major setback delivered by a federal appeals court.

The ruling potentially derails billions of dollars in subsidies for many low- and middle-income people who bought policies. But White House spokesman Josh Earnest says while the case works its way through the courts, it has “no practical impact” on tax credits. He said the White House is confident in Justice’s legal case.

At first blush, this seems rather arrogant. The court struck down the subsidies based on the explicit text in the law, and HHS’ most recent interpretation of its application to American territories is consistent with it. Should the court decision mean an immediate cessation of subsidies?

Well, probably not, for both legal and practical reasons. HHS is almost certain to appeal this to either the Supreme Court or to the en banc panel at the DC appellate level, and ask for a temporary stay in the meantime. Subsidies are not a constant stream, but get paid out on a monthly basis. The Obama administration is confident in getting a reversal and even more confident in getting a temporary stay while the appeals process continues, especially given the stakes involved for people already enrolled on the basis of the promises of subsidies. This isn’t defiance, it’s merely a reminder that this won’t stop on a dime, and it may not stop at all depending on what the en banc or Supreme Court review decides. (Plus, the 4th Circuit ruled the other direction a few minutes ago; Allahpundit has analysis of that coming up next.)


Practically, it might be difficult to stop the subsidies immediately anyway. The Healthcare.gov back end that is supposed to manage that function is still largely AWOL, as Jeryl Bier reminded us on Twitter:

The practical implications of this ruling work in the other direction, too. For states that didn’t opt to build an exchange, are Americans under obligation to comply with the mandates and pay penalties for non-compliance? Allahpundit linked to this earlier, but Michael Cannon’s explanation about the real scope of Halbig is worth reading in full. This not only ends subsidies for as many as 7 million Americans, it also lifts the obligation to pay taxes on tens of millions more for non-compliance — which is what was supposed to fund those subsidies:

Critics will respond that, as dozens of economists who filed an amicus brief on behalf of the government have predicted, a Halbig ruling would also cause the full premium to rise by unleashing adverse selection. This claim is based on a fundamental misunderstanding of Halbig and the PPACA. If a lack of subsidies in federal Exchanges leads to adverse selection, Halbigis not the cause. The cause is Congress tying those subsidies to state-established Exchanges, and 36 states refusing to cooperate. Halbig will not and cannot cause adverse selection. It merely asks the courts to apply the law as Congress enacted it.

Second, Avalere Health, the Urban Institute, and media outlets that have repeated their estimates typically neglect to mention that a victory for the plaintiffs would mean the second-highest court in the land ruled the Obama administration had no authority to issue those subsidies or impose the resulting taxes in the first place – that those taxes and subsidies are, and always were, illegal. Regardless of one’s position on the PPACA, we should all be able to agree that the president should not be allowed to tax and spend without congressional authorization. That’s what’s at stake in Halbig. It is why the Halbig cases are far more important than “ObamaCare.”

The termination of those subsidies and the taxes they trigger takes on an entirely different flavor when we introduce that small detail. If the courts rule for the plaintiffs, I’ll be interested see how many news agencies use headlines like, “Ruling Denies Subsidies to Millions,” versus the more accurate, “Court Rules Obama Gave Illegal Subsidies to Millions.”

Though that small detail doesn’t change the fact that 5 million people have been deeply wronged, it does clarify who wronged them: not the Halbigplaintiffs or a few judges, but a president who induced 5 million low- and middle-income Americans to enroll in overly expensive health plans with the promise of subsidies he had no authority to offer, and that could vanish with single court ruling.

Third, these reports and the ensuing media coverage uniformly neglect to mention that a victory for the Halbigplaintiffs would free not only those plaintiffs but tens of millions of Americans from the PPACA’s individual and employer mandates. Indeed, Halbig would free from potential illegal taxation more than ten times as many people as lose an illegal subsidy.


The bigger question will be whether the IRS will be able to collect any of those fines while Halbig stands as is, and what that does for the entire fiscal standing of ObamaCare. Don’t expect Congress to address the imbalance, either, as Republicans have warned all along about the fiscal imbalances of ObamaCare even outside of Halbig and have no incentive to fix them now.

Also, don’t expect House Republicans to withhold subsidy funds either, because the subsidies are essentially an entitlement program and not a budget line item. A few commenters on Twitter pointed to the House’s supposed “power of the purse,” but that belongs to Congress as a whole, not just the House. Besides, the revenue flow to the subsidies don’t come through appropriations, but through the taxes and fines built into ObamaCare — the supposedly self-sustaining system that aimed to avoid budget battles altogether. With 36 states now out of the system, that revenue flow will dry up tout suite unless HHS gets a temporary injunction soon.

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