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Did the Supreme Court already tip its hand on Obamacare subsidies?

What would these guys say about Obamacare this time? (UPI/Roger L. Wollenberg)

After Tuesday's split rulings on the legality of Obamacare subsidies in federal-run exchanges, it's hard not to wonder what would happen if these challenges actually did reach the Supreme Court.

As I wrote yesterday, there's still a chance that the entire D.C. Circuit overturns yesterday's 2-1 decision, in which the court found the IRS isn't authorized to administer premium subsidies in the 36 states declining to set up their own insurance exchanges. If that decision gets overturned, then you'd have the D.C. Circuit in agreement with the 4th Circuit in Virginia — that federal exchanges can offer subsidies just like the state-run exchanges. Having similar rulings in the appellate courts could make it more likely that the Supreme Court wouldn't take up these challenges.

It still could, though, and trying to predict how the court will act — especially when it comes to Obamacare —could be tricky. How many people thought that Chief Justice John Roberts two years ago would split with the court's conservative wing to uphold the individual mandate as a taxing power? And how many thought that two liberal justices would side with conservatives to rule against the mandatory Medicaid expansion, which had been thought of Obamacare opponents' weakest argument?

There's at least one reason to think that subsidies in federal-run exchanges would be in jeopardy at the high court, and that stems from a recent Supreme Court decision. The court in June mostly upheld the Environmental Protection Agency’s plans to regulate major producers of greenhouse-gas emissions, but the court said the agency overstepped some of its legal authority to regulate small emitters.

It's in this detail that Cass Sunstein, who used to oversee rulemaking for the Obama administration, said he saw a "poison pill" that could spell trouble for future Obamacare cases if they reached the Supreme Court.

In a Bloomberg View op-ed last month, Sunstein pointed to this line in the EPA decision written by Justice Antonin Scalia: "An agency has no power to 'tailor' legislation to bureaucratic policy goals by rewriting unambiguous statutory terms." The EPA's argument, Scalia wrote, "would deal a severe blow to the Constitution's separation of powers," because the president lacks the power "to revise clear statutory terms that turn out not to work in practice."

Sunstein's op-ed points to some Obamacare actions the administration took, such as the temporary extension of health plans that don’t meet ACA requirements. “Some critics who have objected that the executive branch has no power to change ‘statutory terms that turn out not to work in practice’ will take [the court’s] opinion as an endorsement of their views with respect to the Affordable Care Act,” Sunstein wrote.

You could see how that same reasoning could apply to these subsidy cases if they got that far. The plaintiffs challenging the administration argue that the IRS improperly allowed subsidies in federal-run exchanges after the text of the statute became unworkable because of so many states' refusal to set up their own exchanges. If the Supreme Court is receptive to that argument, that could spell trouble for the law and millions of people who received federal help to buy insurance.

I e-mailed Sunstein — who was working for the administration when the contested IRS subsidy rule was issued — to ask whether he sees potential trouble for ACA subsidies given the EPA decision. He declined (albeit politely) to offer much of a response.

He wrote: "Many thanks. I am not doing any interviews this summer, but I will say (just) this: I think that the Fourth Circuit was correct and that a majority of the Supreme Court would agree."

Jason Millman covers all things health policy, with a focus on Obamacare implementation. He previously covered health policy for Politico.



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