In the past six years, nearly all the building blocks of Obama’s domestic legacy, from health care and financial reforms to environmental regulations have been challenged in court. Dodd-Frank, the massive banking reform Law enacted after the financial crisis, has been pocket at in dozens of federal cases.
One of the most critical components of the Wall Street Reform bill passed by Congress in 2010 and signed by the President was the creation of the Consumer Financial Protection Bureau (CFPB), a dedicated, independent cop on the beat with the single goal of protecting consumers from threats like abusive practices of unscrupulous lenders or the fraudulent practices of debt collectors.”
This kind of regulation also stifles innovation and creativity. For example, the Qualified Mortgages rule forces all mortgages into a one-size-fits-all set of underwriting criteria. In so doing, the rule has deprived community banks of their one competitive advantage against megabanks. As has happened so often in the past, paternalistic regulations intended to help consumers end up hurting the most vulnerable American consumers, taking away choices from those consumers who already face limited choices as a result of their situations in life.
On Thursday, The Supreme Court upheld a key provision of King v. Burwell, the Affordable Care Act case and in a broadly written opinion agreed with the Obama administration “that government subsidies that make health insurance affordable for millions of Americans should be available to all who qualify.” Today’s 6-3 Court ruling means that it is all but certain that the Affordable Care Act will survive after President Obama leaves office in 2017, and has a greater chance of becoming an enduring part of America’s social safety net. President Obama’s signature legislative achievement.
KING v. BURWELL
The Patient Protection and Affordable Care Act adopts a series of interlocking reforms designed to expand coverage in the individual health insurance market. First, the Act bars insurers from taking a person’s health into account when deciding whether to sell health insurance or how much to charge.
Second, the Act generally requires each person to maintain insurance coverage or make a payment to the Internal Revenue Service. And third, the Act gives tax credits to certain people to make insurance more affordable. In addition to those reforms, the Act requires the creation of an “Exchange” in each State—basically, a market- place that allows people to compare and purchase insurance plans.
- The Act gives each State the opportunity to establish its own Exchange, but provides that the Federal Government will establish the Exchange if the State does not.
Some states set up their own exchanges, but about three dozen allowed the federal government to step in to run them. Across the nation, about 85 percent of customers using the exchanges qualify for subsidies to help pay for coverage, based on their income.
- This case is about whether the Act’s interlockinged reforms apply equally in each State no matter who establishes the State’s Exchange. Specifically, the question presented is whether the Act’s tax credits are available in States that have a Federal Exchange.
The tax credits are one of the Act’s key reforms andwhether they are available on Federal Exchanges is a question of deep “economic and political significance”; had Congress wished to assign that question to an agency, it surely would have done so expressly. And it is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in craftinghealth insurance policy of this sort.
It is instead the Court’s task to determine the correct reading of Section 36B.
In upholding the subsidies, the majority (a 6-to-3 vote) concluded that the Court must read the statutory provisions of the ACA “in context,” and that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”
In a dissent joined by two colleagues, Justice Scalia wrote that the Court’s conclusion was “quite absurd,” and that “[w]ords no longer have meaning if an Exchange that is not established by a State is ‘established by the state.’”
How momentous is today’s decision? King v. Burwell. Administrative Law & Regulation Practice Group Podcast. Featuring Jonathan H. Adler, Josh Blackman, David B. Rivkin, Jr.