Halbig Follow-up: The fate of the ACA could depend on the definition of 1 word (and not the one you think)

NOTE: Yes, I'm back from the Netroots Nation convention here in Detroit, and yes, I have a mountain of ACA submissions (along with actual paying client work) to catch up on. However, with the DC Circuit Court ruling expected to come out tomorrow, it behooved me to post this ASAP:

A couple of weeks ago I posted a 2nd story about the last (to my knowledge) major anti-ACA case winding its way through the federal court system: Halbig v. Burwell.

In a nutshell, the plaintiffs are arguing that the precise wording of the ACA allows the IRS to issue tax subsidies to people who enroll in QHPs using the state exchanges (NY, CA, KY, CT, etc.), but not to people who enroll through the federal exchange (ie, Healthcare.Gov). If the case survives all the way through to the SCOTUS (or if it survives the full DC Circuit Court and the SCOTUS refuses to look at it), then it would presumably mean that almost 5 million people (or more) who enrolled via HC.gov and qualified for subsidies (about 85% of them) would a) have those subsidies cut off and b) could theoretically have to pay back the subsidies that they already received, assuming the ruling was retroactive.

The end result would, using this logic, be an utter disaster for the ACA, President Obama, the Democrats in general, and the insurance industry as a whole.

However...as I noted in my prior post, depending on how things play out, and how seriously the judges in question (at either the DC Circuit or SCOTUS level) take parsing precise definitions, it's conceivable that there could be an insanely simple, absurdly stupid but (in my humble opinion) rather clever workaround which could theoretically not only save the Affordable Care Act but even turn the tables on the Republican Party, making a "win" on Halbig into a massive political loser.

Go read the post, then come back; I can wait.

OK, done? Good.

If the courts choose to look at the case at the "macro" level (ie, "What did Congress intend with the law?", etc. etc.), then I'm assuming that they'll reasonably conclude that yes, Congress intended the law to provide tax credits to those who qualified regardless of which state they lived in. This assumes, of course, that we're talking about reasonable people, which is obviously a hell of an assumption.

However, if the courts decide to look at the case on the "micro" level--parsing exact definitions of the word "State" (which seems to be the concensus as to how they're proceeding from the people I've talked to about it), then they'll also have to (or at least certainly should) also look equally closely at two other words: "Establish" and "Facilitate."

So, as I said, depending on how the court defines the terms "establish" (ie, to "establish" an insurance marketplace) and "facilitate" (as in, "facilitating" the purchase of insurance policies through the marketplace), it's conceivable that all it would take for any of the individual states to "establish" their own exchange would be to register a domain name at GoDaddy or wherever and set up a simple welcome/information portal site...which would then lead them to HC.gov for the actual purchase of the policy.

As petty and stupid as this may sound, it's no more petty and stupid than the plaintiff's case in the first place.

At the end of that post, I added an update from a guy named Jamey Harvey, who heads up the project team for the DC "state" exchange, who confirmed my point about the state-run exchanges needing to hook into various Federal databases, thus making the term "establish" pretty open to interpretation (after all, if it's OK for a state exchange to rely on some federal databases/resources to operate but still be considered "established" by the state, how far does that extend?)

To answer your question, state exchange rely on "federal hub" as the first source of data for applicants' APTC eligibility; the SBE sends unique identifier for the person, right upfront, and the IRS sends back estimated APTC based on previous year.

However, in a further Twitter discussion with Mr. Harvey, he suggested that it might be even better than that (I've cleaned up the tweets into a more coherent conversation). Read the whole back-and-forth and I think you'll get the gist of my point:

Jamey Harvey
The SBE sends unique identifier for the person, right upfront, and the IRS sends back estimated APTC based on previous year.

Charles Gaba
Thanks! So, again who "established" and "facilitates" the state markets? Even if the # since then is small it'd help me w/off-season projections

Jamey Harvey
Answer is different depending on whether state is SBE, Partnership, or FFM state. (or SBEs newly in "receivership"?)

Charles Gaba
(shrug) my "domain/repoint" was semi tongue-in-cheek but could conceivably be legit. interesting possibility...

Jamey Harvey
Well, I'm no lawyer, but I think its pretty wide open for interpretation. I like the idea, for states that are interested in cooperating. More problematic will be the red states that want to defect. To establish an SBE, states had to make a business case to CMS. Successful business cases resulted in "establishment grants". So, at a typical SBE the feds funded the establishment and the states executed the business plan submitted. Partnerships (8 in 2013) tried to get grants and but didn't get full funding or got stuck. Each does some SBE functions.

Charles Gaba
So in theory, if I was one of the 36 states w/out an SBE, I could "submit" a biz plan that simply said “I'll need just $10 for a domain, a hundred bucks to host a small website portal, & I'll redirect to HCgov after that"? For example, seems to me that @CoveredIllinois would meet the definition of "establishing" and "facilitating" a market, even if all the heavy lifting after that is done on the @HealthCareGov side.

Jamey Harvey
Partnerships include DE (too small) and IL (failed to pass R legislature). Safe imho, even using http://healthcare.gov 

Charles Gaba
So you're saying that my "$10 domain/splashpage" scenario could theoretically be a workaround for Halbig if it came to that?

Jamey Harvey
Partnership states, (IL included) having taken fed estab money & submitted business plans, imho should be in the clear,

Charles Gaba
Fascinating. How about other states going forward; i.e., say Michigan chose to do so this summer (or after SCOTUS ruled)?

Jamey Harvey
Leaves us with the FFM states... the ones that got establishment grants but then failed to launch... should be safe, right?

Charles Gaba
According to the last CMS report, that's 18 states? AZ, NJ, ND, AK, AL, FL, GA, IN, LA, MO, NC, OK, PA, SC, TN, TX, WI and WY

.Jamey Harvey
Many Federally Faciliated Marketplace (FFM) willfully tried NOT to implement ACA. Splashpage could only help the willing.

Charles Gaba
Oh sure, I know, but a few might change R to D in Nov& presume SCOTUS wouldn't rule until next year anyway. Just not sure if they'd already have to be in place or if they could do so after ruling (or between now and ruling); i.e., would SCOTUS rule be retroactive or only going forward (2016+)

Jamey Harvey
Sorry, I missed something. What are the 18 states? The ones that took money and then didn't launch?

Charles Gaba
Not sure; those 18 are listed as "FFM" on CMS report. Others are SBM, Partnership, Supported SBM, SB-SHOP or "Plan Mgmt"...there are only 18 actually listed as "FFM" specifically (pg. 13-16)

Jamey Harvey
Yes, I was thinking the same thing. VA gov, e.g. has flipped from R to D since establishment. Buy http://www.coveredva.com ?

Charles Gaba
Exactly my point. A few hundred bucks could theoretically mitigate, say, 1/2 dmg & make TX/OK/etc. look like jackasses for not shelling out like $200 or so to prevent 100's of thousands of their own residents from going thru $ hell of course that hasn't stopped them re. Medicaid expansion but you get my drift; this would be retroactive i.e., it would impact residents who had already received subsidies, pay taxes, not "moochers" etc (from their POV)

Jamey Harvey
Its definitely harder to take away benefits once they are received.

Charles Gaba
Yup. Halbig is in DC Circuit now; assume it'll take until next spring to make it to SCOTUS? 2 yrs of exchange enrollment. 5M have received subsidies via HCgov so far; could be 2x that by this time next year. 10M middle class people who've already received $thousands in subsidies, etc...nightmare scenario to make 'em pay it back.

Jamey Harvey
imho, the Halbig vulneralble states are the FFM states that have the asterix that indicates "reported no data"!...especially if they are also fighting medicaid expansion. :(

Charles Gaba
I can't imagine even Scalia/Alito would try to force 10M people to pay IRS back retroactively for 2 yrs

Jamey Harvey
It doesn't seem like good politics does it?

Ken Kelly
Taking back subsidies could not be a part of any reasonable remedy for the plaintiffs, so would not be ordered.

Charles Gaba
Right. So, seems to me that remaining states should be able to slap together an "exchange" even if it's just a simple portal like @CoveredIllinois & voila, compliant as "establishing" an exchange which "facilitates"...again, the states in Q would still have to agree to do so; not full solution, but could stave off worst dmg.

Jamey Harvey
 Maybe, the other way to measure if an HBX has been established is whether an HBX authority was chartered.

Charles Gaba
Sure, but where's the fun in that? :)

Jamey Harvey
Yeah, I almost didn't even say it cause I thought it was such a buzzkill! By every measure, MI has establshed. Grants. Site. HBX authority. Enabling legislation. Moving to FFM doesn't undo it.

The en banc hearing is in between, so add another year

Khalil Ali
If ruling is against admin would subsidies be immed. halted? Could admin request a stay to full DC Circuit

Jamey Harvey
I'm just a geek, but I don't think so.  I think it will keep getting appealed of a long time.

If you've read this far, you get the point. It's conceivable that we could be looking at the following scenario:

  • 15 "State-Based Marketplaces" (CA, CO, CT, DC, HI, KY, MD, MA, MN, NV, NY, OR, RI, VT, WA)
  • 2 "Supported State-Based Marketplaces" (ID, NM)
  • 7 "Partnership" Marketplaces (AR, DE, IL, IA, MI, NH, WV)
  • 7 "Plan Management" Marketplaces (KS, ME, MT, NE, OH, SD, VA)
  • 2 "SB-SHOP" Marketplaces (MS, UT)

...leaving only 18 actual completely "Federally-Facilitated Marketplaces" (AL, AK, AZ, FL, GA, IN, LA, MO, NJ, NC, ND, OK, PA, SC, TN, TX, WI and WY).

 In other words, it's possible that the courts might decide that 32 states (plus DC) "count" as being "established" by the "state" and therefore IRS subsidies are kosher for them, leaving only the 18 states listed above as a source of trouble.

Now, that's still a problem for the people in those states, of course, and it includes some big ones, like Texas, Florida, Pennsylvania and Georgia. Even so, as I noted above, that could easily be turned around; I can easily see the attack ad in, say, Louisiana:

"Thousands of Louisianans will have to pay hundreds of dollars in higher taxes...all because Bobby Jindal is too petty to shell out $10 bucks for a domain name!!"

You get the idea.

Stupid? Possibly. A longshot? Perhaps. But every other development attached to the ACA has been equally surreal, so why not this one?