Here We Go Again: Jeffrey Toobin Wades into Halbig’s Waters

Over at The New Yorker the other day, Jeffrey Toobin wrote a short piece on Halbig entitled “Will Textualism Kill Obamacare?” It’s not very good.

I’m not going to do a full critique of the essay, but there are a couple mistakes and misdirections that are worth mentioning. First, if you’ve been following the Halbig litigation, you know that the challengers claim the ACA does not provide for insurance subsidies to folks who get insurance on federally established exchanges. That’s the claim. If the state sets up an exchange, then great, the state’s citizens get tons of subsidies. If the state fails/refuses to set up an exchange, then the feds will provide an insurance exchange in that state, but the people buying insurance on the federally operated exchange will miss out on all those wonderful subsidies. Sure, that makes the federal exchanges almost worthless, but according to the challengers that was the whole point. The states would be “threatened” by missing out on subsidies if they did not set up exchanges, so more states (maybe all of them!) would set up exchanges, or face the wrath of their subsidy-deprived citizens.

You’d never know any of that from reading Toobin’s article. Instead, he says the case is about whether the federal government is authorized to establish exchanges at all. He writes:

According to the D.C. Circuit majority, one line in the text of the A.C.A. makes the federal exchange invalid.

He goes on to write that the Halbig decision is based on the lack of “an explicit authorization of federal exchanges” in the ACA. The problem here is that of course the ACA provides for the creation of federal exchanges.

This may seem like a small distinction, but it is a particularly pernicious one because it makes Toobin’s argument–the one he’s presenting to his readers–monumentally easier. In fact, the change makes Toobin’s argument obviously correct! The plain text of the statute expressly provides for the creation of federal exchanges. As Toobin later writes:

When the Affordable Care Act was being debated, every member of Congress–supporters of the A.C.A. as well as opponents–understood that the federal government would have the right to establish exchanges in states that chose not to create them.

Indeed. But as Lawrence Solum has pointed out, that’s entirely beside the point. The question is whether subsidies are available on those exchanges!

Yes, opinion-piece writers need to simplify complex arguments for their readers–even the sophisticated readers of The New Yorker. But in a piece where the author is arguing for a particular result, that simplification should not result in avoiding or obfuscating the fulcrum of the argument. The entire question is whether subsidies are available on federally established exchanges. Toobin never engages that argument. By twisting the challengers’ argument, he transforms the challenge from “interesting, based in some statutory text, but ultimately unconvincing” to “obviously wrong based on the plain language of the statute.” And his readers are worse off for it.

Second, Toobin uses Halbig as a jumping off point to discuss statutory interpretation more generally, citing to Judge Robert Katzmann’s forthcoming book on the subject. (If you want to get a sneak preview of Katzmann’s book, which has yet to be released, I’d suggest reading his 2012 article Statutes in the N.Y.U. Law Review. I suspect he makes similar arguments in both projects.) Anyway, Toobin says that the Halbig court should have followed Judge Katzmann’s advice and looked to:

the words of members of Congress in debates, the committee reports explaining laws, and all of the source material that reflects how Congress really works.

Okay. Fine. Like Toobin and Judge Katzmann, I agree that legislative history can be a useful source of information to interpret a statute.

So what “words of members of Congress” or “committee reports” would help us in Halbig? Is there a committee report that answers the subsidy question? Toobin does not provide one, and I’ve yet to see one. (If you’re looking for a “how Congress works” argument for why the ACA seems to say “no subsidies” but actually provides for subsidies on federal exchanges, this article by Greg Sargent is really interesting.)

Anyway, the whole thing is disappointing. At the end of the day, Toobin joins other legal commentators whose arguments on Halbig boil down to: “No need to worry about the details of what the statute says. Trust me, I know what the statute means because I know what Congress intended.” And while that sort of argument might go over well at dinner parties, it’s not going to fly in court. And it shouldn’t fly in The New Yorker.

On October 30, I was invited to participate in a Cato Institute panel discussion on Halbig, King, and related challenges to the Affordable Care Act. In the wake of the conference, I’ve written a few posts based on the panel discussion. If you’d like to watch the entire law-focused panel, I’ve created a C-SPAN clip here. My thoughts based on the conference are at Part I (Isolationism)Part II (Textualism), Part III (The Whole-Text Canon), Part IV (Halbig’s “Two Exchanges” Problem), and Part V (Creeping Constitutionalism).



13 thoughts on “Here We Go Again: Jeffrey Toobin Wades into Halbig’s Waters

  1. The Senate Finance committee report, S. Rep. No. 111-89, says at page 37 that the Senate Finance bill provides a tax credit for people who buy insurance through the “state exchanges,” and says at pages 18-19 that when HHS acts to set up an exchange, it is setting up a “state exchange.”

    The report is generally worth reading as an example of meaningful silence, that is, if the Senate Finance Committee had meant to draw such a fundamental distinction between States that set up Exchanges and States that didn’t, it would have said so, somewhere in the document.

  2. A small quibble with the language in your article. While I agree that Toobin was overly broad, it remains that there are, in fact, no “federal exchanges” created in the law. As has been discussed over and over, the ACA only creates state changes with the distinction being on whether or not the state “elects” to create one under 1321 or whether the state “elects” for the HHS Secretary to create one on their behalf.

    Further, anyone who has watched the committee or floor debates with regard to the ACA can plainly see congressional intent each time they spoke to tax credits being provided to “all” with there never, that I have found, being a time when a member of Congress spoke to some states’ citizens or some state exchanges not receiving the tax credits. This takes on extra significance due to Sec. 1321 because they knew that some states would not “cooperate” or couldn’t get their exchanges up in time. Either way, they also wrote into the law a specific waiver provision (Sec. 1332, by Sen. Wyden) that sets forth what states must do in order to free themselves from the exchanges with tax credits and/or other requirements within the ACA. Of course, even when states are allowed to opt out under a 1332 waiver, the authors made sure that tax credits (or their equivalent) still flowed to those citizens in those states. (Same setup for 1331 dealing with alternative coverage for 133-200% of poverty population of the state) While not the “nail in the coffin” per se, Senator Kyl talks during the Seante Finance Committee debates about how his proposed amendment (an opt-out provision allowing states to opt-out of all of Title 1) should not be included in Wyden’s waiver process provisions because Wyden’s process doesn’t allow states to opt-out and he specifically lists the subsidies mandate as one of the things that states could opt out of under his amendment. Now, there would be no need for such an amendment if states could, under Halbig, “opt out” of most of the requirements simply by not establishing an exchange. I think this directly shows the thoughts of Congress as to how the ACA worked according to their understanding. Senator Kyl’s amendment was also rejected which would show congressional intent to not allow states to be able to opt out without the same amount of coverage as would have been available if the Feds did it themselves.

    • Point taken re “federal exchanges.” If I’m going to be critical of Toobin’s word choice, I suppose this is a goose-gander situation. Though I think my shorthand doesn’t really do any work in the argument, either for or against my more general point.

      On the second issue of the legislative history, those are good points, and things that have certainly been argued by sophisticated on-point folks. I’d only add that, if I were Adler/Cannon, the key move you make there is saying that everyone understood that states would actually opt-out. Under their narrative, the opt-out was a necessary inclusion to avoid anti-commandeering constitutional challenges, but it was never supposed to actually happen, except maybe for some de minimis period of time. This fits with their “you lose the credits if you don’t establish the exchange” argument, since allegedly that threat was so strong that no state could resist.

      Of course, I’m assuming you disagree with that narrative, but saying that everyone knew that some states would not cooperate is, in their view, assuming that which needs to be proven. And they explain the statutory opt-outs not as expressions of any intent that that would actually happen, but merely a constitutional fail-safe of sorts.

      But anyway, yes, I totally agree that on the whole the legislative history (including what you mention) and the merger of the bills into a single law reflects your view of the statute’s intended operation.

      My point throughout this entire thing, however, is not to argue the merits (folks like you and Bagley are more in the weeds doing that) but that we should at least be having the *right* argument. The fact that Toobin might be right on the very broad question of whether the plaintiffs or defendants should win in Halbig is sort of beside the point. My issue is whether his article does a good job of presenting our best arguments. Yes, they are complicated, but what is a smart lawyer for if not to take complicated legalistic arguments and explain them to a novice audience?

      • There are numerous examples of people saying every state would create an exchange after enactment of the PPACA. There are zero examples of anyone saying credits would be available in federal exchanges under the Senate bill. Is this dispositive? Of course not, but it should be acknowledged.

        Also, per New York v. U.S., “shall” language (as is states “shall establish” exchanges) should be read as either a) an unconstitutional command, or b) the basis for the provision of incentives. In NY, the Supreme Court finds incentives in the statute and upholds the command as just an indication of Congress’s preference. The plain read of IRC 36B, especially against the backdrop of prior laws conditioning tax credits on state cooperation and other reform proposals that did the same, is consistent with this view. If this interpretation is to be rejected, all I would ask for is contrary evidence — as in actual evidence. That’s what’s so missing from this debate.

      • There are many examples in the pre-passage record of people saying “most” or “almost all” States would establish & run their own exchanges. I’ve seen zero examples of people claiming that every single State would even *try* to run their own exchange, let alone that every State would *succeed* in setting one up to HHS’s satisfaction! (Always remember: the backups for screw-ups & slowpokes – not just refuseniks!)

  3. In terms of your questions at the end, Michael Cannon and I address these questions in the Health Matrix article. We also note that the “established by the State” language was added at two distinct times in the drafting process — including late in the process in Senator Reid’s office. In one of our amicus briefs we also discuss how Congress has somewhat regularly conditioned tax credits on state cooperation, including in the HCTC provisions which (according to the Chairman’s Mark) the tax credits provisions of the PPACA expand upon (and were also a Senate Finance Committee product). We also looked at every mention of “exchange” in the Congressional Record during debate over the PPACA, other PPACA precursor bills, and various reform proposals. None of the more recent reports (like the Sargent article) identify anything we hadn’t reviewed, other than new statements by staffers and confirmation that the final bill is, in various ways, different from what had been proposed in the committees.

    For a compendium of the documents we’ve reviewed and that are worth considering, see this page:

    • The most important error (in my view) of your picture of the legislative history is your claim that S.1796 did not allow for tax credits & subsidies through the backstops. The Chairman’s Mark, Committee report & statutory language itself make it clear that they do. For that matter, so does the Baucus-Ensign colloquy, properly understood. (I’d also mention the CRS summary, but I have no idea how much weight – if any – a court might give it).

      Mark Regan above touches on the Committee Report & Chairman’s Mark: both are clear that all “state exchanges” deliver tax credits, and that the HHS created backstop is a “state exchange”. (Bottom of p. 11 and pages 14-15 of Mark).

      As for the legislative language, directives to the State and Secretary if HHS regarding the state exchanges can be found in Section 2225(b)(1).

      Section 2225(b)(1)(A) addresses the States:

      “… an electing State under subsection (a)(2) shall establish and have in operation 1 or more exchanges …”

      Section 2225(b)(1)(B) addresses the Secretary, in the event that there are any non-electing States, or electing States that run into trouble:

      “…the Secretary shall enter into a contract with a nongovernmental entity to establish and operate the exchanges within the State.”

      Frankly, this should be enough: clearly the exchanges established per 2225(b)(1)(B) are legally equivalent (*the* Exchanges) to those established per 2225(b)(1)(A).

      Should that not be sufficient, there is at least one Halbig-created absurdity in S.1796 in addition to those that were carried into the ACA itself:

      Section 2231(b) obligates insurers to make any and all plans (QHBPs) that it sells in a State available through the “exchange established by the State”. That is, they can sell QHBPs on- and off-exchange, but they cannot sell them off-exchange exclusively. Section 2231(c) obligates “each exchange” within a State to carry all QHBPs licensed to be sold in the State it serves. If 2225(b)(1)(B) exchanges are not considered “established by the State” then it is obviously absurd to obligate the 2225(b)(1)(B) “backstop” exchanges to offer QHBPs without also obligating QHBP vendors to make them available there. Clearly, here, as elsewhere in S. 1796, all 2225(b)(1) exchanges are equivalent, and equally covered by the rubric “established by the State”

      • And yet this language is not in the final bill. If it was taken out (and the limitation to state established exchanges strengthened, as it was in Sen. Reid’s office), we must presume there was a reason to do so.

      • Jonathan,

        Thank-you for your reply.

        If you are prepared to concede that S. 1796, S. 1679 and HR 3962 were all written to guarantee the availability of tax credits and/or other subsidies in every State, regardless of which entity established/ran any of the exchanges (or Gateways) that the various bills provided for, then I’d be happy to engage you further on the problem of the specific language in the ACA.

    • Jonathan, you asking for contrary evidence is exactly what we have given you throughout. The entire CR is littered with speeches, committee debates, and comments from Members of Congress talking about tax credits going to all citizens. The only discussion in regards to the availability of tax credits was about the income levels at which they would be disbursed. This is borne out by every CBO report (and all the discussion in the Senate Finance committee with the CBO folks and Joint Taxation folks) which showed Congress’ intent for tax credits to go to all 50 states.

      This leads to your assertion, through the isolated reading of the text, that this phrase in 1401 was a “threat” and that all states were assumed to cooperate. This is complete hogwash when one looks at the reality of time period in question. A multitude of house members made reference on the floor, before the passage of the PPACA, that states were already mounting legal challenges. Further, Rep. Garrett, 2 days after the passage of the ACA, introduced H. Res. 1230 that commends three-fourths of all states that have introduced or passed legislation to block the implementation of the ACA. Many of those proposals were introduced well before passage of the ACA which is not surprising considering I can’t think of a single Congressional program where all 50 states signed on. Its ludicrous to even suggest. It only becomes more ludicrous in light of the federal fallback and “state flexibility in the operation of exchanges” provisions. These provisions were not added to “get around commandeering” because there was nothing to commandeer. The ACA pre-empts state law with regards to all of Title I. Also, under the setup of the ACA, the HHS Sec. does most of the work anyway by providing templates, blueprints, setups, funding, and other help to states.

      This leads to the next hole in your argument regarding NY v. US, and this idea of incentives versus commandeering. The ACA was setup to ALLOW states the opportunity to setup their own exchanges within the parameters in order to give those states who wanted it (See Ben Nelson’s comments that you misconstrue) the power to control the exchanges in their states. The alternative was to give up all control over the exchanges and cede more power to the federal government (which is what those like Ben Nelson were talking about in the first place) Further, it makes no sense to talk about states being able to “opt out” of this system because they dont actually “opt out” of anything. This is clearly shown through the numerous GOP “opt out” amendments that were rejected and the Wyden waiver process that was included. These senators knew that states could, in no way, affect the regulations that were coming from the HHS Sec regarding the insurance reforms or the exchanges. Rep. Ryan explained this succinctly in the House

      Finally, as to your argument that this follows NY v. US because of the “choice”, this “threat” also fails the tests laid out in NY v. US that such a “threat” be clear and unambiguous (Pennhurst). Clearly, most of the requirements to be met within the Act are not even necessarily laid out within the Act but left to the HHS Sec. to determine. Further, the “threat” is not even directed at the States or even included in the same Subtitle, much less in the same section (1321) where it spells out what happens to states that can’t establish or states that elect to allow the HHS Sec. to do it. If this was truly a “threat” such that it was recognized, it would have been included in the original true “threat” case of the Medicaid expansion. Further, it almost certainly should have come up in the Medicaid expansion case because, under the Halbig interpretation of the phrase, there are more “threats” than simply the tax credits.

      Under the Halbig interpretation of the phrase, for non-electing states:

      1. Section 1401, 1402 denies tax credits to those citizens with no foreseeable statutory provision for those citizens to ever get tax credits as once an exchange is established, it cant be established again by the state.

      2. Section 2001 requires states to maintain their current eligibility standards forever with no ability to lower or lessen the burden on themselves ever (due to the inability to establish an exchange)

      3. Section 2201 denies ALL medicaid funds to a state that does not establish an internet website that links to an exchange established by the state.
      (So it requires states to maintain their medicaid eligibility forever but also removes all medicaid funds at the same time? That is absurd, but it is consistent with the Halbig interpretation)

      4. Section 10203 provides procedures for coverage of children in states that established but not in states that did not (no mention anywhere else of a plan for those kids not covered)

      5. Section 1312(f), it removes all qualified individuals from the exchange (who are the exact people under 1311(d)(2)(A) who the exchanges are supposed to serve)
      Judge Griffith REALLY bungled this point by pointing back up to 1312(a) in determining what this means. 1312(f) reads as saying “with respect to an exchange, an individual who is seeking to enroll in a qualified health plan in the individual market offered through the exchange, and resides in the State that established the Exchange (exception for regional exchanges under 1311(f))
      This precludes ANY other persons from enrolling in an exchange as the statute is unambiguously clear on this point. If you are a person seeking to enroll in a plan in the Exchange and you don’t reside in the state that established the exchange, you are not a qualified individual. Thus, you are not allowed to shop on an exchange which makes qualified health plans available to qualified individuals and qualified employers.

      5. And reporting requirements that are unnecessary for federally-established state exchanges and pharmacy manager reporting requirements that dont apply to federally-established state exchanges.

      All of these instances lead to absurdity when looked at together. They lead to a completely illogical and incoherent system. Further, not once were any of these provisions mentioned or explained that all of these requirements would be different for electing and non-electing states.

      So, Jonathan, you can answer those charges, but I have a few questions of my own for you to answer.

      1. Please, please, please explain the qualified individual for us.
      2. Please explain how the ACA threatens all Medicaid funds while also requiring states to maintain eligibility standards for non-electing states.
      3. Explain the difference between “established by A State” and “established by THE State”. (I’ve been curious as to what the specific purpose for using the definite article in one place was versus using the indefinite article in another.
      4. Finally, please explain/list all of the requirements that states must meet to be considered to have “established an exchange” versus what “other requirement” HHS Sec. must “take such actions as are necessary to implement” in order to comply with Congressional directives in the ACA.

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