WASHINGTON — As President Barack Obama this week launched a new campaign to defend the Affordable Care Act, a federal judge here heard arguments in a lawsuit nearly identical to the one filed by Oklahoma Attorney General Scott Pruitt that would, if successful, deal a crippling blow to the law.
U.S. District Judge Paul L. Friedman promised to make a decision as soon as possible in the case, one of four that raises the same basic argument that Pruitt made first in his Oklahoma lawsuit.
That argument is that the Internal Revenue Service went far beyond the plain language of the Affordable Care Act to grant subsidies, based on income, to people who buy insurance on exchanges. Those subsidies can trigger penalties for employers and individuals.
One section of the law says that the subsidies, in the form of tax credits, are available to people who buy insurance “through an Exchange established by the State.”
However, 34 states, including Oklahoma, refused to establish their own exchanges, and the federal government has had to set up exchanges in those states to sell insurance policies. The IRS, in writing a rule to implement the law regarding subsidies, made no distinction between state-established exchanges and federal ones.
Pruitt and others have challenged that IRS rule, arguing that the law plainly says the subsidies are only available in exchanges established by states.
The issue at the core of the lawsuits also has been explored by congressional Republicans and was a frequent topic of discussion at a Judiciary Committee hearing Tuesday about the president's constitutional duty to execute laws.
Pruitt says law
In a column this week in The Wall Street Journal, Pruitt wrote, “Should the courts decide the IRS is exceeding its authority and isn't allowed to assess the employer penalties in states that have not established their own exchanges, the structure of the ACA will crumble — as one of the primary mechanisms the federal government has employed to force people into the health-insurance market evaporates.”
A U.S. district judge in Muskogee has allowed most of Pruitt's case to move forward, rejecting the Obama administration's contention that Oklahoma couldn't legitimately sue over the issue.
The case here is further along, as Friedman has heard arguments from both sides on the main issue and is now mulling whether he should block the IRS rule.
Justice Department attorney Joel McElvain, defending the IRS in court on Tuesday, said it was an “absurdity” to read the law as limiting subsidies to state-run exchanges. The whole point of the law, he said, was to provide affordable health care and the subsidies were critical to that, whether they were established by states or the federal government.
The IRS interpretation “does make sense in the context of the overall” Affordable Care Act, McElvain said.
A path to Supreme Court?
Ultimately, judges in Oklahoma, Virginia and Indiana could rule differently in the similar cases, and federal appeals courts also could issue conflicting decisions.
That's what happened with the Affordable Care Act lawsuits that made it to the U.S. Supreme Court in 2012, and, more recently, with the Hobby Lobby case from Oklahoma and a similar one from Pennsylvania challenging the law's mandate to cover contraception; the U.S. Supreme Court agreed last week to hear the two contraception cases.
Aaron Cooper, a spokesman for Pruitt, said Wednesday, “Having multiple suits in different circuits is good for several reasons. First, the Obama administration has historically taken a narrow view of what a loss in a single circuit means. Often, the administration views such losses as just binding them in that particular circuit but not elsewhere.
“A legal win in multiple circuits ensures the victory will have a broader effect. Similarly, wins before multiple judges serves to legitimize the ruling. Finally, having challenges in multiple circuits can help even if one set of plaintiffs loses because its sets up a ‘circuit split' that would all but ensure the Supreme Court reviews the case.”