Yesterday’s DC Circuit Court ruling on Halbig v. Burwell provides some important lessons in governance for Washington. The 2-1 decision by the nation’s second highest court struck down the notion that subsidies apply to those on the federal exchange, which was not plainly stipulated in the original statutory text. The IRS conveniently expanded the meaning of “established by the state” to encompass the federal exchange, after less than a third of the states set-up their own state-based exchange.

This executive (and linguistic) overreach by the IRS and White House, has caused another devastating blow to the President’s signature law. Besides the obvious assumption that our government should let the three branches fully operate within their legal bounds, here are three critical takeaways that the Administration – and even Congress – should heed.

Semantics is everything.

Words mean things, especially in a court of law, and this ruling proved that. Case Western Reserve Law Professor Jonathan Adler during a teleforum hosted by The Federalist Society explained why the “IRS rule is not consistent with the text of the act.”

“At the end of the day, the court concluded that the phrase “established by the state” was not open to interruption. “Established by the state” is not established by the federal government – it is established by the state. The federal government was not able to offer an explanation for what the language does or what purpose is serves in the statute, if it does not limit the exchanges in which tax credits can be available. The federal government [also] was not able to point to enough evidence either in other portions of the statute or in legislative history to overcome the plain text of the statute.” [1]

Health and Human Services (HHS) faced a similar definition dilemma when territories like Northern Mariana Island questioned if some of Obamacare provisions applied to them because technically they are not states. HHS’ initial response was they have to comply. But low and behold last week the agency changed their decision after “careful review,” allowing territories to exempt themselves. HotAir astutely notes: with HHS using the “word ‘state’ narrowly in arriving at that conclusion,” which is the opposite of their defense in the Halbig case, “what will the D.C. Circuit do with that en banc?” [2] Evolving definitions for political expediency are not known to create strong precedence.

Assumptions are dangerous.

Giving states a huge monetary incentive – subsidies – to create their own exchange, the Obama Administration was caught off guard when the majority of states passed on the offer and shifted the responsibility to the federal government. Despite the majority of Americans disapproving the law prior to implementation, the White House assumed it was an offer the states couldn’t refuse. They were unprepared when states listened to their constituents; avoiding a money-guzzling exchange. It was dangerous for the Administration to assume, and it’s even more dangerous to circumvent legislative protocols by attempting to change the meaning of a law.

Haste leads to haphazard laws

Our deliberative bodies have forgotten how to properly deliberate. The famous Obamacare line – we have to pass it to find out what’s in it – epitomizes how broken the system is. If the House and Senate were like many citizens, who combed through the law and tried to understand its implications, they may have caught the wording “glitch,” or at least discussed the consequences of omitting “federal exchange.” But, that would have exposed the hidden agendas that were tucked between thousands of pages of legislative garble, hence, the reason for haste.

In this case, Washington’s lack of prudence may work to our advantage, especially if it dismantles a law that should have never been passed in the first place.


  • 1- Comments by Adler, Jonathan. Federal Health Care Exchanges Not Eligible for Subsidies: Halbig v. Burwell – Podcast. http://www.fed-soc.org 22 July 2014.http://www.fed-soc.org/multimedia/