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Halbig & King, Not Just About Obamacare, But Who Makes Our Laws

Seal of District of Columbia Court of AppealsObamacare is clearly not out of the legal woods, as demonstrated by the Federal Appeals Court decisions of Halbig v. Burwell[1] and King v. Burwell[2] both decided on the same day and reaching different results.   In Halbig the court found that the IRS had written law rather than enforced it and the King court found just the opposite.  The cases are critical to the future of Obamacare and are likely to end up in the Supreme Court.

This controversy involves issues well beyond Obamacare.  It is a rare matter that implicates the basic principles of American government: federalism and separation of powers.  The relationship of the federal government to state governments and the proper roles of the legislative, executive and judicial branches of government are at the heart of these matters.

Background of Halbig and King[3]

The Affordable Care Act has varied penalties, taxes and benefits.  Congress passed the law and delegated to several federal agencies, including the Internal Revenue Service its execution.  The agencies have authority to issue regulations to enforce the law Congress wrote.

The law called for the creation of  “insurance exchanges” to be set up and run by the states.  If a state could not or would not set up such an “exchange” the federal government could set up and run an “exchange” in that state.  Certain individuals who purchased insurance  “through an exchange established by the state” are eligible for tax credits and subsidies.   36 states did not establish exchanges, and the federal government established and runs exchanges in those states.

The IRS established regulations about subsidies and credits[4] for individuals, not only in the states[5] that established exchanges but for individuals in the 36 states with federal exchanges. The legal question centers on if the IRS has authority to issue regulations on these issues for the states with federally exchanges.

One court says the IRS does not have the authority (Halbig) and the other court (King) says it does.[6]  The issue goes to the heart of Obamacare and American government.

Federalism Prohibited Congress from Ordering States to Establish Exchanges

One of the founding principles of the United States was its unique concept of federalism. Power over specific subjects was given to the central government and all other matters were controlled by state governments.[7] Despite the growth of the federal government, states retain some vestiges of the sovereignty from the original design.  One key remaining limit on the federal government is the inability to order the states to do certain things.

The clearest statement of this principle comes from Printz v. United States, 521 U.S. 898 (1997):

Congress cannot compel the States to enact or enforce a federal regulatory program. Today we hold that Congress cannot circumvent that prohibition by conscripting the States’ officers directly. The Federal Government may neither issue directives requiring the States to address particular problems, nor command the States’ officers, or those of their political subdivisions, to administer or enforce a federal regulatory program.”

As for the Affordable Care Act, no matter how much Congress wished to command states to establish “insurance exchanges”, it simply was without power to do so.

Federalism Does Not Prohibit Congress from Creating Incentives

While Congress cannot command states to enforce a federal program, it can and does create incentives for states to engage in conduct the federal government desires.  The federal government thought it was a good idea to lower the blood alcohol content for driving under the influence to .08.  To coerce states to change their laws on this issue, the federal government threatened to withhold federal highway funds from states that refused to do so.

Eventually, faced with the loss of billions of federal dollars, each state lowered its legal blood alcohol limit.

In like fashion, the federal government offered to qualified citizens of each state tax credits and subsidies when their state established an insurance exchange.  Unlike the .08 law, 36 states chose to forgo this benefit and did not establish exchanges.

The Proper Role of Legislative, Executive and Judicial Branches

The Congress, as the legislative branch, writes the laws.  In this case, Congress wrote that the system of subsidies, credits and penalties was triggered when there is an “exchange established by the state.”[8]  That is the law as Congress wrote it.

The Executive, (in this case the IRS, under the direction of President Obama) is charged to take Care that the Laws be faithfully executed” For executive agencies that means issuing regulations that comport with the law as Congress wrote it.

The Judicial branch is to enforce the law as Congress wrote it.[9]  If the Executive fails to follow the law that Congress wrote, the courts are obligated to declare the actions of the executive illegal.[10]

The Halbig Court Followed its Duties, the King Court Did Not

The Halbig court read the law.  It clearly gave the IRS authority to issue regulations when there was “an exchange established by the state”.  Much like Congress has only the authority found in the Constitution’s listed powers, an executive agency only has the power given to it by Congress.  The ACA does not mention IRS authority to issue regulations regarding the relevant subsidies, penalties and taxes when there has not been “an exchange established by the state”.  Since the authority was not given by Congress, the IRS could not issue the regulations and declared the IRS actions illegal.

The King court read the law it thought Congress meant to write, not the law Congress wrote.  Since the King court thought Congress meant to include exchanges established by the federal government, those judges expanded the power of the IRS to impose taxes, penalties and grant subsidies.  The IRS was not faithfully executing the law, so the King court rewrote the law.

The Question is the Rule of Law, Not the Policy of Obamacare

The basic question in the Halbig and King matters is not whether the Affordable Care Act is good or bad policy, but rather, what part of government under our system is charged with writing the law.  Congress was not created in Article I of the Constitution by accident.  The legislature was designed to be first among equals.  The president and his agencies are to faithfully execute and the courts are to enforce laws as written by the Congress, not as they might wish that Congress had written them.


[1]The US Court of Appeals for the District of Columbia Circuit

[2]The United States Fourth Circuit Court of Appeals

[3]There are two other cases involving the same issues at the lowest level of the federal courts, the district trial courts, these case Indiana v. Burwell and Pruitt v. Burwell.

[4]The existence of the subsidies and credits also triggers penalties for individuals and businesses that fail to purchase or provide insurance for their employees.  Thus the IRS regulations have the effect of imposing taxes upon persons and businesses in the 36 states that did not set up their own exchanges.

[5]Along with the District of Columbia

[6]The subsidies, credits, taxes and penalties are all critical elements to the overall concepts of Obamacare.  The complete opinions in King and Halbig discuss this in great detail.

[7]This was seen as a key protection for the liberty of Americans by avoiding a concentration of power in a single governmental entity.  This is defined in the 10th Amendment:  “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

[8]The complex relationship of these provisions are discussed in detail in the 116 pages of court opinions. Links to the opinions are at the case names at the beginning of this article.

[9]Providing that Congress had the constitutional authority to pass the law in the first place.

[10]This is different from unconstitutional, which goes beyond powers granted by the Constitution.  In this instance, the IRS has issued regulations beyond the authority granted to it by Congress.

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