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The accidental case against Obamacare

How a lawyer, a law professor, and a libertarian found the Affordable Care Act's secret weakness

A lawyer, a law professor, and a libertarian spent the last three years struggling to convince first themselves and then national Republicans that a "glitch" in the Affordable Care Act could be the law's undoing.


Now, the sales pitch is over. The Supreme Court will rule this month in King v. Burwell. The lawsuit will determine whether the Obama administration has the legal authority to dole out billions in tax subsidies to Obamacare enrollees.

Unlike the last time conservatives took Obamacare to the Supreme Court — when the Republican party, major activists, and 26 attorneys general joined forces — the new challenge has a more surprising backstory for a big case. It is the result of the key players working loosely, overcoming lawsuit fatigue in conservative circles, pushing an argument that seems more technical than substantive, and even a bit of luck.

"There is nothing very organized about it," Michael Greve, a law professor at George Mason University who supports the case, has written. "The litigation has no single mastermind or man behind the curtain. The campaign is the product of a loose conservative-libertarian infrastructure."

The case now sits with the Supreme Court, despite the unusual route it took. So while supporters might have viewed it as a nonsense legal challenge — never taking it as seriously as the individual mandate case — they still find themselves back where they were three years ago: fearing that the law could fall apart with just one court decision.

The lawyer

Tom Christina did not want to take on the Affordable Care Act.

A former Reagan-administration official turned corporate lawyer, Christina is part of the 36-person employee-benefits practice at the law firm Ogletree Deakins. When Congress began to pursue health reform, his firm decided that somebody ought to read the actual bill. Christina got the assignment.

"Someone had to follow the Act in case it got passed," he told me in a recent interview. "I was volunteered for that job."

So, Christina read the law. And at a poorly attended conference at the American Enterprise Institute in December 2010, he spoke about his findings. No one cared too much.

The conference was aimed at finding new ways to challenge the health-care law. There was a then-nascent challenge to the individual mandate winding its way through district courts that looked promising. Conservatives were still hungry to hedge their bets and find other ways to bring down Obamacare if the individual-mandate argument failed (as it ultimately did).

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Christina's slide. (American Enterprise Institute)

"The bastard has to be killed as a matter of political hygiene," Greve, then the director of the federalism project at the American Enterprise Institute, declared at the panel. "I do not care how this is done, whether it's dismembered, whether we drive a stake through its heart, whether we tar and feather it and drive it out of town, or if we strangle it. I don't care who does it, whether it's some court someplace or the United States Congress, any which way, any dollar spent on that goal is worth spending."

Where Greve spoke in bold declarations, Christina gravitated towards more subdued legalese. When he dropped a bombshell in the form of a dark-blue PowerPoint slide, none of the attending wonks actually seemed to notice.

The slide pointed out that the section of Obamacare that explained how tax credits work — Section 1401(a)(2), to be exact — specified that the financial help would go to those who purchased coverage on "an exchange established by the state." There was no similar provision, or call out, for people who got their coverage on a marketplace that the federal government set up.

"I noticed something peculiar about the tax credits. There will be no tax credits for tax payers who live in non-capitulating states," Christina told the audience.

Looking back on that presentation, Christina says he really didn't think much at the time about what this would mean for the health-care law.

"I think people imagine a eureka moment," says Christina. "It was nothing like that. I was assigned to do this for my firm."

The mess

The Affordable Care Act did not follow the normal procedure when it became law. Normally, one chamber passes its own version of a bill. The other chamber passes a separate version. The two bodies hold a conference, where they reconcile any differences between the two bills and generally clean up the language and tighten the statute. The merged bill goes back to both chambers, which vote again.

This did not happen with the Affordable Care Act. As anyone who covered it at the time — as I did, working as a reporter for Newsweek — remembers, the law's passage was an absolute mess. Sen. Ted Kennedy's death in December 2010 lost the Democrats their supermajority in the Senate — and meant that the health law wouldn't survive a second vote in the Senate.

Democrats were forced to stick with the Senate bill they had already passed; anything they sent back to the chamber for another vote would inevitably fail. A final conference never happened. All the messy language and loose ends that legislators expected to get ironed out simply became part of the law.

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During the days and nights I spent on Capitol Hill covering the debate, the idea of not offering subsidies to some enrollees just never came up. Staff who worked on the law say they always intended for all Obamacare enrollees to get health-insurance subsidies; the law simply wouldn't make sense without them.

"The evidence of congressional intent here is overwhelming," John McDonough, who worked on the Health, Education, Labor & Pensions committee during the health-reform debate, wrote in an email. "There is not a scintilla of evidence that the Democratic lawmakers who designed the law intended to deny subsidies to any state, regardless of exchange status."

As for the language that Christina highlighted, they see that as evidence of the health law's rushed passage. Nobody corrected the types of drafting errors that a conference committee would typically address.

"At the end of the day, this should have never happened and is a product of the rushed way the law was passed," says Chris Condeluci, who worked as tax and benefits counsel for the Senate Finance Committee's Republicans during the Affordable Care Act debate.

The law professor

Jon Adler can't remember exactly when he came across Tom Christina's presentation. Sometime in late 2010 or 2011, he thinks. Adler, a Case Western University law professor, was preparing to present at a University of Kansas conference on the health-care law and was searching online for what others had said on the issue.

He listened to the audio from Christina's presentation while driving and later clicked through the slides. Adler included the point about the subsidies in his February 2011 talk. "It was something I highlighted in my presentation," Adler says. "No one seemed particularly disturbed by it."

Adler wasn't particularly disturbed by it either; like Christina, he thought it was an interesting snafu in the law but not much more. He happened to mention the issue to Michael Cannon, the long-time health-policy director at the libertarian Cato Institute, over email a few months later.

Neither Adler nor Cannon could recall what, exactly they'd been emailing about in the first place. Adler didn't care much about health policy; his expertise was in law. But he knew that Cannon had spent the past few years testifying before state legislatures about why they shouldn't implement Obamacare. So Adler mentioned one more argument he could add to his presentation.

"He had been talking about how states shouldn't cooperate. And I responded to him with something like, 'If they don't create an exchange, they can't get the tax credits,'" Adler recalls. "He said, 'What?' And I told him, 'Read the statute.'"

"I don't think Jonathan understood the significance of the feature when he told me, maybe because he wasn't a health-care wonk who talked about three-legged stools all the time," Cannon says.

Cannon did: he's a health wonk who knew immediately that taking away subsidies would leave Obamacare with a giant hole.

"What I recognized was that this allowed states to block one of the three legs of Obamacare’s three-legged stool: the subsidies," he says. "And they could do so in a way that would increase pressure on Congress to re-open the law. So I started adding that into my list of reasons states shouldn’t establish exchanges."

There wasn't much that Cannon and Adler could do with their discovery at that point. The federal government still hadn't published the rules governing how the insurance subsidies would work; it was still possible that the Obama administration might come out and agree with them, saying state exchanges were the only bodies authorized to dole out funds.

The Obama administration eliminated that possibility in May 2012: as everyone expected, they issued final rules stipulating that all exchanges, both those administered federally and those administered by states, could provide shoppers with help.

The search for a plaintiff to challenge the rule was officially on.

The legislative history

Over the past three years, Cannon and Adler's argument against Obamacare has evolved significantly.

For about two years, they and other challengers made a purely textualist argument. The health-care law says, in plain language, that the government can only give financial help to those buying coverage in "an exchange established by the state."

Put aside Congress' cries that they meant for any health-law enrollee to get subsides, this argument goes. The government has to live with the language in the law that it passed — and it says that subsidies only go to those enrolled in state-based exchanges.

Cannon and Adler initially thought this way, too. They wrote a Wall Street Journal op-ed calling it a "glitch."

But their argument changed in 2012. Cannon and his research assistant spent months pouring over every mention of the word "exchange" in the Congressional record of the health-law debate. Cannon still keeps a thick, black binder with the whole thing in his office.


That effort, Cannon says, convinced him Congress expressly intended to use insurance subsidies as a way to entice states into building insurance marketplaces.

"If you look at the tax-credit eligibility rules, they are very tightly worded," Cannon says. "It’s not in one place, but in two places, it says that the credits are only available 'through an Exchange established by the State.'"

This is where I and others who followed the legislative debate over Obamacare have trouble sticking with Cannon's version of the events. I covered the drafting of the health law in detail, and in every conversation I ever had with anyone involved, they always believed that Congress meant for every state to have subsidies.

The whole point of the federal exchanges, after all, was to make sure Obamacare worked in states that wouldn't or couldn't build an exchange of their own. Congress always meant for residents of all 50 states to have access to financial help. It was never a question, during the five years I've spent writing about Obamacare, whether this would be the case.

This is where judges, too, have found the challengers' case to be weak. "It is clear," Judge Roger Gregory wrote in the Fourth Circuit decision against the plaintiffs, "that widely available tax credits are essential to fulfilling the Act's primary goals and that Congress was aware of their importance when drafting the bill."

Some King supporters are skeptical of Cannon's argument, too. They question whether their efforts are best spent attempting to divine thoughts legislators had five years ago.

"I don't think you have to get into that. It's really quite beside the point," says Jim Blumstein, a law professor at Vanderbilt University who has previously worked on health-law litigation. He says that in discussions with some of the King litigants, he's "pushed hard for a focus to be on what the law actually says. The intent is not critical."

The libertarian

Finding a major flaw in the health-care law was only half the battle for conservatives. They also had to find a plaintiff — someone who the law had harmed, who could bring a lawsuit against it.

The search for a new Obamacare challenger initially went quite poorly. The individual mandate case had failed earlier that summer and, among conservatives, there was lawsuit fatigue. There was no appetite for a lawsuit that appeared to hinge on a drafting error.

Cannon badgered a half-dozen governors and attorneys general to take the case, especially those who had worked on the individual mandate. He's an energetic speaker with a quick wit and an appetite for a long fight. For much of 2011 and 2012, he was criss-crossing the country to testify before state legislatures (shortly after the birth of his twin daughters, he did switch to doing some testimony via video chat). Whether in Missouri or Maryland, Cannon was turning up at governors' doorsteps across the country, urging them that they should not, in any circumstances, help the federal government implement Obamacare.

Now, Cannon had a way that he thought Republicans could in fact halt Obamacare, with a new lawsuit. The problem was, none of them believed him.

"I couldn't interest Ken Cuccinelli or Pam Bondi," Cannon says. "I think I mentioned it to Paul LePage. I spoke with Rick Scott, and he said he was interested but never did anything. Phil Bryant seemed excited, but no follow through."

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Doug Graham (CQ-Roll Call Group via Getty News Images)

Nothing worked until Oklahoma attorney general Scott Pruitt became interested. He had, like many other Republican attorneys general, filed a challenge to the health law's individual mandate. It was still pending at a district court when the Supreme Court ruled that part of the law constitutional.

The judge gave Pruitt a choice: he could drop the suit, given the Supreme Court ruling, or he could amend his complaint to challenge a different part of the law. Pruitt chose the latter. On September 9, 2012 — two years after the AEI presentation and three months after the Supreme Court ruling — his was the first lawsuit to challenge the legality of Obamacare's insurance subsidies.

Initially, conservative health-policy experts hoped that the Oklahoma lawsuit would include private citizens challenging the health-care law alongside the government. But the state couldn't scrounge up additional plaintiffs before the deadline to amend its case and ultimately went it alone.

This is part of the reason that, six months later, on May 2, 2013, a separate lawsuit arrived in the United States District Court for the District of Columbia: Halbig v. Burwell. The Competitive Enterprise Institute, a Washington-based think tank, had financed the lawsuit and recruited a plaintiff (Jacqueline Halbig von Schleppenbach, a former Bush administration official turned consultant) for the case.

The newly filed lawsuit moved slowly. It irked Mike Carvin, the lawyer on the suit,  enough that he sent the district court's chief justice, Royce Lamberth, a letter asking him to reassign the case to one his colleagues.

So Carvin filed yet another lawsuit in Virginia, King v. Burwell, on September 16, 2013. Eventually, one of them had to move.

Click on the graphic to view full size. (Anand Katakam/Vox)

The initial rulings in King and Halbig did not go well for Carvin: in early 2014, he lost both district court challenges. District of Columbia Judge Paul Friedman described the plaintiffs' arguments as "unpersuasive." The Virginia judge who ruled in King said the challengers had "no direct support in the legislative history of the ACA for Plaintiffs' theory that Congress intended to condition federal funds on state participation."

Carvin appealed both decisions. And on July 22, the subsidies argument got its first positive news. In the span of two hours — and by pure coincidence — the appeals courts for the District of Columbia and the Fourth Circuit issued conflicting rulings. The DC Court ruled against Obamacare's subsidies; the Fourth Circuit ruled for them.

This was already a good day for the health-care law challengers. The circuit split gave Supreme Court a stronger reason to step in and resolve the conflict. CEI organized an impromptu celebration in its downtown Washington offices for that afternoon.

As CEI's general counsel Sam Kazman was heading to the party, a co-worker pulled him aside. On his computer, he played a video of MIT economist and former White House consultant Jon Gruber essentially making their main legal argument.

"If you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits," Gruber says in the video, taped at a 2012 speaking appearance.

Gruber has disavowed the remarks, saying that he spoke "off the cuff" and made a mistake. There's reason to believe him: Gruber spoke regularly to dozens of reporters during this period and never mentioned this idea to any of them. So these comments are at odds with the bulk of his work on this issue.

But in the video footage, Gruber appeared to be providing, at least in part, the evidence the Virginia judge said the challengers lacked: proof that Congress — or at least an outside advisor who worked with Congress — did intend to condition federal funds on state participation.

"It was a holy shit moment," Kazman says. "We quickly put it up on our website. It went viral overnight and was the subject of a question at a White House press conference the next day."

The government's case

The Supreme Court agreed to hear King v. Burwell on November 7, 2014. Oral arguments occurred on March 4, and a decision is expected in June.

The government has, so far, won three of the five court decisions on the subsidies issue. Court watchers thought the oral arguments went well for the administration.

The government's argument has remained consistent throughout the process: of course Congress meant for all 50 states to have subsidies. If the legislative language is unclear on whether that is the case, then the judicial system ought to give deference to the executive branch in interpreting the law.

"During the time the Act was under consideration, no Member of Congress ever suggested that tax credits would be available only in States that established their own Exchanges—even though the language on which petitioners rely was in draft bills for months before the Act was enacted," the government writes in its Supreme Court brief. "Any such suggestion would have produced a firestorm of controversy, but there was none."

I've talked to about a dozen legal experts who have followed this case the closest. Some of them agree with the challengers' arguments; others don't. But none of them are writing off the case as a superficial challenge to the Affordable Care Act. A slim majority told me that, if they had to place a bet, they would expect the Supreme Court to rule against the Affordable Care Act.

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Yes, they say, the Supreme Court did save the Affordable Care Act three years ago by upholding the individual mandate. But the legal issues then were about the law's fundamental constitutionality. If the court had ruled against the mandate, it would have dismantled the law.

In this case, the justices may be less likely to view their decision as equally dire: they're simply sending the law back to Congress, which would face no constitutional obstacle to changing the law to allow subsidies in all 50 states. When experts survey the court, they see a panel of justices that could react favorably to the textual arguments that the health-law challengers make.

And they note that it took at least four justices to agree to hear the case. It only takes one more to create a majority against the health-care law. The idea of five justices finding the challengers' arguments compelling is well within the realm of reality for most observers.

"When I read prominent people saying this case was frivolous, I winced a bit," says Nicholas Bagley, an assistant law professor at the University of Michigan who has written extensively on the King challenge. "This is a serious lawsuit. This should make people worry."


Editors: Laura McGann, Ezra Klein
Lead Illustration: Anand Katakam
Lead Photo: Saul Loeb / AFP




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