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Opinion HHS wins one Obamacare case and loses another

Friday, the U.S. Court of Appeals for the D.C. Circuit released two opinions in Patient Protection and Affordable Care Act (PPACA) cases.  In one case, the federal government prevailed. In the other, it did not. Both opinions were unanimous and (in my opinion) likely correct. The two cases are also further confirmation that Obamacare litigation is far from over. To the contrary, for reasons I explained here, the PPACA created a perfect storm for ongoing litigation.

In the first case, West Virginia v. Department of Health and Human Services, a unanimous panel concluded that the state of West Virginia lacks Article III standing to challenge the Obama administration’s decision to waive some of the PPACA’s requirements governing minimum coverage requirements. This litigation responds to the Obama administration’s response to outrage over insurance plan cancellations — cancellations that were politically problematic because they revealed that the president’s promise that “if you like your health insurance plan, you can keep it” was a lie. (Indeed, it was Politifact’s “Lie of the Year” for 2013.)

The administration’s actions in question were unlawful. Nonetheless, I agree with Nicholas Bagley that the court was correct to conclude that West Virginia lacks standing to challenge the action. As the court explained:

Although Appellant dresses up its argument as a breach of State sovereignty in violation of the Tenth Amendment, its injury is nothing more than the political discomfort in having the responsibility to determine whether to enforce or not – and thereby annoying some West Virginia citizens whatever way it decides. And no court has ever recognized political discomfort as an injury-in-fact. We do not doubt that West Virginia now confronts different political terrain than it did before HHS announced its new non-enforcement policy. But we do not think that represents cognizable legal injury. Increased political accountability of this nature – greater likelihood of political consequence in making a decision – is the kind of inherently immeasurable harm that our standing doctrines have been designed to screen out.

I agree with the D.C. Circuit that West Virginia’s argument for standing was “extraordinary,” as was the administration’s action. Nonetheless, the latter cannot justify ignoring the former. While there may be parties that could claim to suffer a cognizable injury from the administration’s lawless actions, West Virginia was not among them.

In a second case decided Friday, the administration did not fare so well.  In Central United Life Insurance, Co. v. Burwell, another unanimous panel invalidated an HHS regulation for exceeding the scope of its delegated powers under the Public Health Service Act (PHSA), as amended by the PPACA. Specifically, HHS had adopted regulations seeking to prevent consumers from obtaining fixed indemnity policies that fail to satisfy the PPACA’s minimum essential coverage requirements, despite the PHSA’s exemption of such plans from such requirements.

Here’s how the court explained what HHS was trying to do, and why it was unlawful:

HHS described its rule as an attempt to “amend the criteria for fixed indemnity insurance to be treated as an excepted benefit.” 79 Fed. Reg. at 30253 (emphasis added). Most likely, HHS intended only to amend the regulatory criteria because of course only Congress can amend its statutes. But it’s more accurate—and fatally so—to say HHS’s rule proposed to “amend” the PHSA itself. The PHSA lists only certain defined criteria for fixed indemnity plans to have “excepted benefits” status: the plan (1) is provided under a separate policy, contract, etc., and (2) offers independent, noncoordinated benefits. . . . So long as these conditions are met, the plan qualifies as an excepted benefit. . . . Thus, where Congress exempted all such conforming plans from the PHSA’s coverage requirements, HHS, with its additional criterion, exempts less than all. Disagreeing with Congress’s expressly codified policy choices isn’t a luxury administrative agencies enjoy.
Nothing in the PHSA suggests Congress left any leeway for HHS to tack on additional criteria. . . . Nor do any subsequent amendments to it. The ACA, in fact, endorses the PHSA’s definition—it excludes the “excepted benefits . . . described in” the PHSA from what counts as “minimum essential coverage.” 26 U.S.C. § 5000A(f)(3). At no point does the ACA give even the slightest indication the definition of “excepted benefit” was suddenly debatable; rather, the Act doubled down on the PHSA’s existing requirements. Ever since it first carefully defined what counts as an “excepted benefit” in 1996, Congress has never changed course or put its original definition in any doubt. Where the text is as clear as it is here, “that is the end of the matter.” Chevron, 467 U.S. at 842; see also Ry. Labor, 29 F.3d at 671 (en banc) (rejecting an argument that Step One is satisfied “any time a statute does not expressly negate the existence of a claimed administrative power” as “flatly unfaithful to the principles of administrative law . . . and refuted by precedent”).

Despite the complex subject matter, the D.C. Circuit made quick work of the administration’s arguments in an uncharacteristically brief opinion. It took relatively little space to explain how HHS “clearly misread” the relevant statutory text.

Here again, I think the D.C. Circuit got it right. Federal agencies do not have the roving authority to fix statutory schemes that don’t produce results the agencies (or even the statute’s authors) like. Such authority, if it exists, must have been delegated by Congress. If it is a problem consumers are electing to purchase fixed indemnity policies and pay the individual mandate penalty, in lieu of qualifying health insurance, then it is a problem Congress must fix, either by amending the statute or delegating the requisite authority to the applicable agency. In the meantime, HHS can’t manufacture statutory ambiguity to justify its actions.

For those who keep track of such things, both panels were bipartisan. In each case, the panel consisted of a Reagan nominee, a Bush nominee and an Obama nominee.

Finally, it’s worth reiterating that these are anything-but-the-last PPACA cases in the federal courts. Not only is House v. Burwell pending in the D.C. Circuit, but there are other cases pending in the Court of Federal Claims, as well as in other courts. As I noted above (and update in a forthcoming article in the Journal of Employee Rights and Employment Policy), the PPACA created a perfect storm for ongoing litigation, so we will be reading (and, in my case, writing) about PPACA cases for years to come.