When a federal appeals court ruled last month that a
seemingly arcane wording flaw in the Affordable Care Act should invalidate a
central part of the law, many of those who drafted the statute five years ago
reacted with shock and anger.
In 2009, they had spent months piecing together a compromise
that sought to create a national system of subsidized insurance — but one run
by the states. Now, they fear their work could be undone by what some call a
"drafting error" and others portray as a political miscalculation.
The judges from the U.S. Court of Appeals for the
District of Columbia Circuit based their ruling on language saying that
subsidies would be offered for health policies bought through an "exchange
established by the state."
That wording meant only marketplaces established by 14
states, including California, would qualify, the three-judge panel ruled; 5
million people in 36 states where consumers used the federal government's
exchange should not get subsidies.
The ruling seems likely to propel Obamacare once more before
the Supreme Court, where opponents came within a single vote of overturning the
law in 2012. That prospect has sparked an intense debate over how the disputed
language ended up in the law.
The story begins in 2009, when Democrats held a solid
majority in both houses of Congress. In the House, most Democrats favored
having one nationwide federal insurance exchange. They predicted — correctly,
as it turned out — that many Republican-controlled states would balk at
extending insurance to low- and middle-income residents.
But in the Senate, some Democrats worried over the specter
of a "federal takeover." They insisted that states have a prime role.
To complicate matters further, two Senate committees adopted health bills. The
more conservative Finance Committee relied entirely on states to set up
exchanges; its bill said low-income buyers would receive a federal subsidy for
insurance obtained "through an exchange established by the state."
The more liberal Health Committee included a "federal
fallback" in case some states refused to cooperate. Its bill said the
federal government "shall establish and operate a Gateway" for
insurance in any uncooperative states, and their low-income residents
"shall be eligible" for subsidies.
When the two bills were merged at the end of 2009, the
"shall be eligible" promise for all low-income residents was dropped.
Left intact was the Finance Committee provision that said subsidies would be
provided for insurance purchased through an "exchange established by the
state." The Senate approved the bill on Dec. 24, 2009.
Once the bill became law, more than half the states signaled
they would not operate insurance exchanges, leaving the task for Washington. Conservative
opponents of the law soon spotted a potential weakness. In September 2011, the
Cato Institute's Michael Cannon said the "Obamacare glitch" could
block insurance subsidies in all the states that relied on a federal exchange.
Congressional staff members who worked on the law insist
that everyone intended to provide subsidies nationwide. They didn't focus on
the now-crucial phrase and admit they did not foresee a rebellion among
conservative states. Many former Senate aides say other parts of the law make
clear the federal exchange is the stand-in for a state exchange and that, as a
result, subsidies should be allowed. That's the position taken by the Obama
administration and upheld by the U.S. 4th Circuit Court of Appeals, based in
All the backward looks at the law's intent may not determine
the outcome, however. The Supreme Court is likely to have the final word, and
its conservatives frequently say they decide cases based on what a law says,
not what Congress may have intended.
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