Hours After Anti-Obamacare Lawyers File Brief, An Ally Reveals That The Brief’s Key Claim Is False

CREDIT: AP PHOTO/DAVID GOLDMAN

Lawyers and activists seeking to enlist the Supreme Court in a crusade against Obamacare face a challenging task. On the one hand, the justices are far more likely to side with the plaintiffs in a lawsuit attacking the law if they believe that such a decision will have relatively modest repercussions. On the other hand, these lawyers and their allies have actively and, at times, loudly, touted their unwillingness to restore the health care that millions of Americans would lose if the justices allow themselves to be drafted into this crusade.

On Wednesday evening, one of the central figures in this lawsuit offered a stark reminder of why it is difficult to send one message to your friends and a different message to the Supreme Court. That evening, lawyers asking the Supreme Court to defund much of the Affordable Care Act and strip health insurance from millions of Americans filed their final brief before the justices. Only a few hours later, however, one of the architects of this lawsuit undercut a core claim in the brief. Though the lawyers seeking to gut Obamacare are telling the justices that it will be no big deal if they support this effort, because the states can step into the gap and restore what the justices took away, these lawyers’ key allies are already making plans to ensure that the states will do nothing of the sort.

The plaintiffs in King v. Burwell claim that the Affordable Care Act gave each state, including states led by staunch opponents of Obamacare, the ability to prevent much of the law from functioning within their state. The law says that states should have “flexibility” to decide whether to set up an exchange where their residents can buy health insurance, or whether to allow the federal government to do so for them. Nevertheless, the King plaintiffs claim that billions of dollars worth of tax credits that help people pay for insurance are unavailable in states with federally-run exchanges. If the justices agree with this misreading of the law, it could set off a “death spiral” of rising premiums and shrinking insurance markets that ultimately collapses the individual health insurance markets in many states.

In their first brief to the Supreme Court, the plaintiffs’ attorneys claim that this structure — where states either set up their own exchange or deny one of the law’s central benefits to their citizens — was an intentional design. “Congress used a variety of ‘carrots’ and ‘sticks’ to induce states to establish Exchanges voluntarily,” according to the plaintiffs’ opening brief, and one of the “sticks” was the threat of lost subsidies. The lawyers offered little evidence that Congress intentionally designed the law this way, however, and new information has since emerged which undermines what little evidence they do offer.

The brief they filed on Wednesday pushes a subtly different narrative — now the plaintiffs’ attorneys argue that “it is irrelevant whether Congress subjectively intended to impose the condition.” Nevertheless, their second brief clings to the idea that the law should be read in a way that uses the threat of lost tax credits to force states to set up their own exchanges. In the new brief’s narrative, the “trumpeted negative effects” that will result if the Court rules for the King plaintiffs does not stem from the law itself. Rather, it stems from the Obama administration’s decision to read the law “to eliminate states’ incentive to establish Exchanges, predictably causing two-thirds to opt out.” “Had the IRS from the start made clear that subsidies were limited to state Exchanges,” the second brief argues, “states would not have overwhelmingly refused to establish them.”

This claim is implausible on its face. Republican opposition to Obamacare runs deep. After the Supreme Court gave states the option to opt out of the law’s Medicaid expansion, many Republican-led states did so. According to the Kaiser Family Foundation, 22 states opted out of this expansion, despite the fact that it will literally cost them nothing during the first three years of the expansion. Should the justices make exchange tax credits optional as well, they should anticipate similar recalcitrance on the part of Republican state policymakers.

Indeed, one of the leading architects of the King litigation seems to be counting on this fact. On the same day that the King plaintiffs filed their second brief, Bloomberg‘s David Weigel reported on Twitter that Ohio Gov. John Kasich (R) is “open” to “creating a state exchange if SCOTUS struck down fed exchange subsidies. In response to this tweet, Case Western Reserve law professor Jonathan Adler responded that it “might be hard” for Kasich to do this legally “given Ohio’s Health Freedom Amendment.”

Professor Adler has arguably done more to advance the King litigation than any lawyer other than the ones who directly represent the plaintiffs in this case. He co-authored a paper in 2012, along with the Cato Institute’s Michael Cannon, that laid out the legal theory the King plaintiffs use to attack the law. As early as 2011, Adler and Cannon also authored a Wall Street Journal op-ed claiming that a “glitch” in the Affordable Care Act denies tax credits in states with federally-run exchanges (although he’s since revised his views to claim that this “glitch” was an intentional design). A local news report claimed that “[i]f the law known as Obamacare gets struck down in the latest court challenge, thevictors will thank a Hudson resident and Case Western Reserve University law professorwho discovered what the law’s critics say is a major flaw.” That professor, of course, is Adler.

So Adler’s been involved in this effort to bring down the Affordable Care Act almost from the beginning, and his statements offer a window into the strategic thinking of the law’s opponents.

The “Health Freedom Amendment” that Adler references provides that “[i]n Ohio, no law or rule shall compel, directly or indirectly, any person, employer, or health care provider to participate in a health care system.” Adler argues in a subsequent tweet to Weigel that this amendment is relevant to whether Ohio can set up a state-run exchange because “tax credit eligibility triggers employer mandate and slides more people to individual mandate penalty.” In essence, if the justices decide to hobble Obamacare in King, and Ohio sets up an exchange to undo the damage caused by such a decision, that will set in motion a chain of events that will lead to the federal government requiring some people to buy insurance.

The question of whether the Ohio constitution prohibits the state from taking an action that causes the federal government to do something the state could not do on its own may be a difficult question of state law. It also may ultimately need to be resolved by the state supreme court. Adler’s exchange with Weigel is informative, however, for two reasons. The first is that it hints at what the lawyers attacking Obamacare will do next if states try to mitigate the damage caused by a hypothetical decision for the plaintiffs inKing. Ohio is hardly the only state that enacted new restrictions intended to thwart implementation of Obamacare. If those states try to set up their own exchanges, expect lawsuits to flourish claiming that those exchanges are illegal.

The second reason why Adler’s exchange with Weigel is significant is that it undermines the King plaintiffs’ attorneys’ efforts to allay any concerns that the justices may have about what sort of chaos and suffering could follow King. Contrary to the plaintiffs’ attorneys’ suggestion that states would have lined up to set up their own exchanges if only the Obama administration had “made clear that subsidies were limited to state Exchanges,” Adler’s comment is a reminder of the systematic effort Obamacare opponents engaged in to prevent state officials from implementing the law. It is also a warning that those opponents have many cards left to play if they score a victory in King.

Indeed, the law’s opponents began laying the groundwork for a potential victory in Kinglong before a handful of federal judges breathed legitimacy into a legal theory that was widely viewed as unlikely to prevail by experts and scholars. Adler’s partner in this effort, Cato’s Michael Cannon, literally traveled the country urging state officials not to set up exchanges — a cross-country tour which helped ensure that the justices do maximal damage if they side with the plaintiffs in King.

It is a bit late, in other words, for King’s lawyers to try to calm the justices’ fears about what will happen if they join the crusade against Obamacare. Those lawyers’ most important allies have worked very hard to ensure that the most disruptive scenario becomes a reality.