Another big week for Obamacare in the courts

Next week will be a big one for Obamacare in the courts. In Sebelius v. Hobby Lobby, the Supreme Court will hear argument on whether the contraception mandate violates the religious freedom of businesses and business owners. An anti-religion outcome in the case would forever alter the relationship between the government and believers, essentially requiring that people with sincere religious beliefs give up their rights to religious practice when they operate a business.

Victory for Hobby Lobby’s religious owners is not assured. The Circuit Courts of Appeals to consider the question issued decidedly mixed decisions, with one court glibly holding that for-profit corporations simply cannot exercise religion at all and that religious owners are distinct and wholly separate from the businesses they run. But counsel for the Becket Fund, which is litigating the Hobby Lobby case, points out that “for-profit doesn’t mean no conscience.”

Many entrepreneurs embrace profit-making and charitable purposes. Companies such as shoes seller Toms and eyeglass firm Warby Parker sell products at a profit with a pledge to devote part of their earnings to the needy. The number of for-profit businesses with a built-in charitable dimension has proliferated.

Other businesses forgo profits in order to honor their convictions. Gap Inc. increased its starting wage for employees out of a sense of social responsibility. CVS Caremarksays it decided to stop selling tobacco products rather than continue to violate the company’s social mission.

This combination of conscience and enterprise is a vital part of our free-market tradition. If the 2008 financial debacle taught anything, it is that focus on profits above all can cause terrible damage. It was a profits-first mentality that encouraged lenders to deceive customers, ratings agencies to deceive banks, and banks to deceive each other.

The challenge for Hobby Lobby will be to get the Supreme Court to acknowledge the arbitrary line that the Obama administration has drawn between non-profit and for-profit companies. If Hobby Lobby’s owners had organized as a non-profit, they would be exempt from the contraception mandate. But, so far as HHS is concerned, the decision to organize as a for-profit enterprise, even though their religious belief is exactly the same as exempt non-profits, deprives Hobby Lobby and its owners of First Amendment protection.  The court will hopefully reject this arbitrary line-drawing, and by a wide margin. The First Amendment does not protect certain corporate forms; it protects religious belief and practice, which here is the same for both non-profit and for-profit companies.

The capacity of judges to draw obvious distinctions will also be at play in the D.C. Circuit Court of Appeals next week. In Halbig v. Sebelius, employers are challenging the HHS and Treasury’s authority to provide tax subsidies to individuals who sign up for Obamacare on federally-run exchanges. The Obamacare law was so sloppily written (rushed Christmas Eve votes will do that) that Congress forgot to provide for such subsidies in the text of the law. Professor James Blumstein explains:

So, the IRS rode to the rescue. It wrote a regulation that, despite the provisions in the ACA itself, provided a subsidy for all income-qualified purchasers, even those on federally-run exchanges. A result is that an employer could face a substantial new tax if just one employee receives a federal subsidy, even if the employer’s state has chosen not to set up an exchange. And the states would no longer have an incentive to run an exchange since residents would receive federal subsidy on federally-run exchanges.

This seems pretty straightforward: There are two types of exchanges under the ACA, one established by states, and another established by the federal government. The statute only authorizes subsidy on state-run exchanges.

There are three of these “subsidy cases” to keep an eye on. So far the district courts to have ruled on this issue have disturbingly suggested that HHS and Treasury must have had the authority to issue the regulation because otherwise Obamacare wouldn’t work. Never you mind that the authority to simply rewrite the laws isn’t found in the Obamacare text either.

The subsidy cases aren’t quite as flashy as the contraception mandate cases. They’re about statutory interpretation, which only a lawyer could love. (And I do.) But unlike the contraception mandate cases, the subsidies cases could actually bring the entirety of Obamacare crashing down. If HHS has to let Hobby Lobby and other employers decline to provide contraception, Obamacare, with its exchanges, its taxes, its intrusion into daily life, will go on. But if HHS and Treasury are forbidden from offering health care subsidies to people in two-thirds of the states, the whole thing collapses as Obamacare’s enormous premium and deductible hikes price people out of the market. So definitely send a prayer for the religious business owners in Hobby Lobby. But send one for the Halbig plaintiffs too. If Congress won’t bestir itself to end this unpopular, destructive law, the Courts might.

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