(Not So) Funny Things are Happening … at the Courthouse

July 23, 2014

You probably heard the news on Tuesday. First up:  the D.C. Circuit Court of Appeals reversed a District Court ruling which had upheld subsidies for insureds purchasing health insurance on the federal exchange. Bad news for the Affordable Care Act. Then, about an hour later, came the opinion from the Fourth Circuit in Richmond, upholding a District Court ruling which had also upheld federal exchange subsidies.

So, we have an Administration victory in the Fourth Circuit (3-0), and a loss in the D.C. Circuit (2-1). A mess, for sure, but not one that cannot be understood.

What’s the fight about? Without going too far into the weeds, there’s a clause in the law which provides for subsidies for insurance purchased on state exchanges. There’s another provision which creates the federal exchange, to cover people in states without exchanges. The second clause says nothing about subsidies. So according to the plaintiffs, Congress intended to not provide subsidies for insureds whose states have no exchanges (34, presently). The ACA works if you live here, but not there! Or, according to the plaintiffs (and the majority drafter on the D.C. Circuit), intent doesn’t matter, and it’s just too damn bad, according to the D.C. Circuit majority, that ”our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly.”

Down in Richmond, on the other hand, the court followed a different path. It relied on the Chevron deference rule, adopted by the U.S. Supreme Court in 1984. This rule directs courts to figure out first whether Congress has spoken directly on an issue. If so, case closed. If not, the court must give effect to an administrative agency’s interpretation, unless it is arbitrary or capricious. (In the Chevron case the Court upheld a Reagan Administration EPA interpretation of “new or modified stationary sources” of air pollution. The Natural Resources Defense Council did not like the definition. It sued. It lost.)

So the Fourth Circuit, using the Chevron deference rule, upheld the Internal Revenue Service regulations which give subsidies for federal exchange insureds. It held that Congress had not addressed the issue of subsidies for federal exchange insureds, the IRS decision was not arbitrary and capricious, and the courts must defer to the executive branch which executes the laws.

Plaintiffs and their fellow travelers have conjured up arguments that Congress intended for a subsidy distinction, as a way to force states to build their own exchanges. There’s no real evidence to support this theory, but they’ve advanced it anyway. In reality, all of the evidence suggests an attempt to defeat the law, once again, “because we can!”

So what happens now? In Washington the government will seek en banc review, which means it will ask all of the active—not senior—judges on the D.C. Circuit to hear the matter. (From the three-judge panel only the author of the opinion, Judge Thomas Griffith, will be able to hear the en banc reviews, as the other two judges have senior status.) The D.C. Circuit is comprised of 11 active judges, seven of whom were appointed by Presidents Clinton and Obama. (I despise this predictor method, but it’s increasingly accurate on cases with political significance, so look for an en banc reversal, maybe.)

The plaintiffs in Richmond will likely go straight to the U.S. Supreme Court. The Fourth Circuit has been, traditionally, the most conservative circuit in the country, has 14 active judges, eight appointed by Presidents Clinton and Obama, so the thinkers think the plaintiffs will bypass the en banc process. (I still hate this method.)

And what will the Supreme Court do? It need not hear the Fourth Circuit case, unless there is a circuit conflict (and even then, it does not have to hear the case.) Assuming a reversal in Washington—not at all guaranteed—there will be no circuit conflict, and no reason for the Court to hear the case … which does not mean the Court won’t take the case anyway. If four justices want to hear a case, it gets heard. Can you spell A-l-i-t-o, K-e-n-n-e-d-y, S-c-a-l-i-a, and T-h-o-m-a-s?

Finally, two more observations. First, when these cases were filed the D.C. Circuit lacked a full complement of active judges—there were open slots—and the majority among the active judges were Bush (I and II) appointees. That changed with the new filibuster rules. The court is fully or almost fully staffed, and elections matter. And the choice of the Fourth Circuit suggests some forum shopping for a friendly, conservative court. Not so much anymore! Elections really do matter!

Second, we’ve got real problems to worry about in this country, and in the world. Shame on the people who are still messing around with this nonsense!

4 Responses to (Not So) Funny Things are Happening … at the Courthouse

Leave a Reply