Halbig Lawsuit Dismissed: Federal Judge Upholds Health Insurance Premium Tax Credits

A Washington federal court’s recent ruling on the validity of premium tax credits confirmed what most people have assumed since the Affordable Care Act (ACA) became law in 2010: the original intent of the law was to make premium tax credits available in all states to help make insurance affordable, regardless of whether the marketplace is operated by the state or the federal government. Opponents of the ACA claimed (and Judge Friedman disagreed) that one sentence in the law proved otherwise—that the ACA should be read to limit premium tax credits only to state-run exchanges.

The court’s opinion dispassionately and systematically dismantles this argument, one of the last remaining tactics that opponents of the ACA have deployed in their efforts to sow doubt about the legitimacy of the law.

Opponents have openly stated that the Halbig case is part of a multi-pronged strategy to undermine the law. In an October 2013 op-ed, Michael Cannon, of the libertarian Cato Institute, outlined ways to undermine the ACA. Lawsuits like Halbig are the number two tool in his toolkit. Furthermore, Cannon and his colleagues have tirelessly promoted their strategy elsewhere. And the Attorneys General of Indiana and Oklahoma have filed similar lawsuits, while a fourth case is pending in Virginia. All make a similar argument as Halbig.

Cannon and his colleagues are correct on one point: if courts were to conclude that tax credits were not available in states with federally-run marketplaces, health insurance would be unaffordable for most people in those states and the marketplace would cease to function. But, as demonstrated in Judge Friedman’s Halbig ruling, their legal argument falls apart upon examination.

The basis for these cases depends entirely on taking one sentence of the entire ACA and pulling it out of context. As Judge Friedman notes, that’s not how courts, or anyone, is supposed to determine how a law works. The text of a law must be read in context. Once you examine the whole law, it’s clear that Congress intended that premium tax credits be available to everyone in all states, regardless of whether the states or the federal government operate the exchange. Otherwise, why would the federal government have been instructed to operate an exchange to begin with? Nicholas Bagley at the Incidental Economist has a good summary of the analysis (thanks to Ezra Klein for spotting it).

But probably the boldest argument in these lawsuits is their claim that Congress actually intended all along to limit the availability of tax credits only to people living in states that set up their own exchange. They argue that Congress wanted to threaten states into setting up their own exchanges. But they have been unable to produce any evidence to support this claim – because there isn’t any. Jonathan Cohn took this argument apart over a year ago in The Legal Crusade to Undermine Obamacare – and Rewrite History, and we at Families USA did the same in an amicus brief filed in the Halbig case. In fact, as Judge Friedman noted in his opinion, if anything, the history shows that Congress intended to make premium tax credits available everywhere.

Supporters of the Affordable Care Act should not be complacent. The Competitive Enterprise Institute, another libertarian think tank, has already said it will appeal (which is curious, because the Competitive Enterprise Institute is not actually listed as a party or attorney on the case). Three other cases are still pending in Virginia, Indiana, and Oklahoma. But the Halbig ruling is a welcome and much-needed dose of rationality in the overheated rhetorical battles over the legitimacy and future of the Affordable Care Act.