Obamacare is in serious danger. After weathering a Supreme Court challenge that threatened to gut the law by striking down the individual mandate, major pillars — the business penalty, the individual penalty, and the generous health-care subsidies that make the exchange plans affordable — are being challenged in court, with at least two lawsuits potentially dealing mortal wounds before New Year’s Day.
The chink in the armor is that Obamacare subsidizes plans for people “enrolled in through an exchange established by the state under section 1311 of the Patient Protection and Affordable Care Act,” but in a move Democrats didn’t expect, 34 states didn’t establish an exchange. And if people aren’t able to access these subsidies, they can’t be penalized.
In addition, businesses where the employees are unable to access these subsidies also can’t be penalized. Two hundred million Americans live in those 34 states — a hefty chunk of the U.S. population. (RELATED: Will the (lack of) state exchanges bring Obamacare down?)
“This is far more egregious than any other step the president has taken to ignore or rewrite federal law,” Cato Institute healthy policy studies director Michael Cannon told The Daily Caller, “because here, what the president is doing is trying to borrow and spend hundreds of billions of dollars that Congress expressly prohibits him from touching, from spending.”
But why would Democrats include this self-destruct mechanism in the law? As “an incentive for states to act,” Cannon explained — one that wasn’t fine-tuned when the Democrats scrambled to jam Obamacare through after Republican Scott Brown’s special election upset the balance in the chamber. “The incentive they created is creating an exchange,” Cannon said. “They never expected it to become law. They never expected, even if it became law, for states to refuse to set up exchanges.”
There are currently four suits pending regarding illegal taxation under Obamacare, with plaintiffs ranging from individual taxpayers to the states of Oklahoma and Indiana. On Tuesday, a D.C. court will hear oral argument for Halbig v. Sebelius, a case named for plaintiff Jacqueline Halbig, a resident of Virginia who runs her own one-woman consulting firm, and Department of Health and Human Services Director Kathleen Sebelius.
Two months ago, the judge declined to grant a preliminary injunction against Obamacare but agreed to hear the merits of the case. The Obama administration had unsuccessfully attempted to derail the suit by arguing that it was too speculative.
Another case with traction is King v. Sebelius, which is unfolding in Virginia. Both the judge in D.C. and the judge in Richmond could issue a ruling before Jan. 1 — potentially halting the subsidies and penalties from kicking in. This would be a public disaster for the administration.
That’s because the administration put a lot of effort into making sure that potential enrollees couldn’t log online and see unsubsidized plans, asking HealthCare.gov users for things like their income and household size in an attempt to figure out the taxpayer-funded subsidies they qualified for.
“The administration didn’t want people to see the unsubsidized premiums — they’d freak out,” Cannon told TheDC. “So if those subsidies are in fact illegal and a federal judge strikes them down, then never mind the people freaking out before they realize they’re eligible for subsidies — they’re not going to be eligible at all and they’re going to flee the exchanges; and the administration is very afraid it. They didn’t want these folks to get spooked.”