Day: March 12, 2017

The Legality of the 3/6/17 Executive Order, Part II: The Due Process Clause Analysis

On March 6, 2017, President Trump issued a new executive order on immigration that superseded an order he signed on January 27. For an in-depth discussion on the first order, please see my two-part series on Lawfare (Part I and Part II) and my forthcoming essay in the Texas Law Review See Also, titled The 9th Circuit’s Contrived Comedy of Errors in Washington v. Trump.

I will analyze the new executive order in three parts. In Part I, I addressed how the new order comported with the Immigration and Nationality Act.  In this part, I will assess how the new order comports with the Fifth Amendment’s Due Process clause, and related issues. Part III will analyze how the new order fares under the Establishment and Equal Protection clauses.


Who Is Covered?

The most significant change from the old order to the new order is the scope of the entry-ban. Section 3(a) denies entry to foreign nationals from Iran, Libya, Somalia, Sudan, Syria, and Yemen who fall into three categories:

(i) are outside the United States on the effective date of this order [March 16, 2017];

(ii) did not have a valid visa at 5:00 p.m., eastern standard time on January 27, 2017; and

(iii) do not have a valid visa on the effective date of this order.

In effect, if an alien in these categories did not have a visa prior to the date of the first executive order he will (probably) be subject to the new executive order. However, Section 3(b) riddles this general rule with exceptions, as foreign nationals in the following six categories are not subject to the entry-ban:

(i) any lawful permanent resident of the United States;

(ii) any foreign national who is admitted to or paroled into the United States on or after the effective date of this order;

(iii) any foreign national who has a document other than a visa, valid on the effective date of this order or issued on any date thereafter, that permits him or her to travel to the United States and seek entry or admission, such as an advance parole document;

(iv) any dual national of a country designated under section 2 of this order when the individual is traveling on a passport issued by a non-designated country;

(v) any foreign national traveling on a diplomatic or diplomatic-type visa, North Atlantic Treaty Organization visa, C-2 visa for travel to the United Nations, or G-1, G-2, G-3, or G-4 visa; or

(vi) any foreign national who has been granted asylum; any refugee who has already been admitted to the United States; or any individual who has been granted withholding of removal, advance parole, or protection under the Convention Against Torture.

These six exclusions are significant. First, the order expressly excludes lawful permanent residents (LPRs) who hold green cards. Now there is no doubt that LPRs from these six nations can gain admittance to the United States. Second, aliens from these six nations—including nationals granted asylum or refugees who have “already been admitted”—will not be denied entry. Third, dual-citizens with citizenship from one of the six nations can be admitted if they travel under their other passport. (For example, an alien with British and Iranian citizenship would be allowed entry using his U.K. passport). These categories cover wide swaths of nationals who have some tangible interest in the United States, either through a travel document provided by the government, or in the case of refugees, those who have already been admitted.

But wait, there’s more. Section 3(c) vests consular officers with the “discretion” to grant waivers beyond those aliens categorically exempted by Section 3(b):

Notwithstanding the suspension of entry pursuant to section 2 of this order, a consular officer, or, as appropriate, the Commissioner, U.S. Customs and Border Protection (CBP), or the Commissioner’s delegee, may, in the consular officer’s or the CBP official’s discretion, decide on a case-by-case basis to authorize the issuance of a visa to, or to permit the entry of, a foreign national for whom entry is otherwise suspended if the foreign national has demonstrated to the officer’s satisfaction that denying entry during the suspension period would cause undue hardship, and that his or her entry would not pose a threat to national security and would be in the national interest.

While the phrase “undue hardship is not defined,” section 3(c) provides nine examples where “case-by-case waivers could be appropriate.” If the Deferred Action for Childhood Arrivals (DACA) guidance documents taught us anything, this discretion will likely be implemented mechanically.

The first “hardship” category is significant.

(i) the foreign national has previously been admitted to the United States for a continuous period of work, study, or other long-term activity, is outside the United States on the effective date of this order, seeks to reenter the United States to resume that activity, and the denial of reentry during the suspension period would impair that activity[.]

This category concerns, among others, foreign students who were previously in the United States and seek to return. In litigation before the Ninth Circuit, the state of Washington derived its strongest basis for standing from foreign students who attended the state’s universities and could not re-enter. This class of aliens is not categorically guaranteed a visa or entry, but in light of the memorandum, the government could make a compelling case that a facial challenge on behalf of such students should fail. Rather, an as-applied challenge would be the appropriate vehicle. Specifically, the government could assert that a student from one of the six nations would likely be admitted, unless his or her entry would “pose a threat to national security.”

However, this suggested-waiver would not assist aliens who seek to become students but were never previously admitted to the United States. Washington could assert standing on behalf of these prospective students, but, for reasons I will develop below, their due process rights are nonexistent because of their lack of prior connection to the United States.

The fourth category is potentially even more significant.

(iv) the foreign national seeks to enter the United States to visit or reside with a close family member (e.g., a spouse, child, or parent) who is a United States citizen, lawful permanent resident, or alien lawfully admitted on a valid nonimmigrant visa, and the denial of entry during the suspension period would cause undue hardship[.]

Even if a foreign national from one of the six nations had never entered the United States, but seeks a visa and entry “to visit or reside with a close family member,” he would likely qualify for a hardship waiver. This category seeks to address the facts at issue in Kerry v. Din, where a wife (who was a citizen) filed suit after her husband was denied a spousal visa due to alleged terrorist connections. This hardship would ensure that spouses and other close relatives would not be denied a visa and entry because of this order. (Of course, they could be denied a visa or entry under other laws predating this order).

In light of this policy statement, I am somewhat perplexed that the Hawaii Attorney General included as a plaintiff the son-in-law of a Syrian national who “does not currently hold a visa to enter the United States” (p. 6). The complaint states that the March 6, 2017 order will prevent the mother-in-law “from obtaining a visa to visit or reunite with her family in Hawai‘i.” The complaint provides that the son-in-law “fears that his mother-in-law will, once again, be unable to ‘enter’ the country.” The facts relate that her application is currently pending. Unless a consular officer determines that the mother-in-law would “pose a threat to national security,” the guidance from the President suggests that a visa will issue.

Rather than suing the government now, wouldn’t the proper path be for the mother-in-law to wait and see if the visa is denied? (The complaint does not assert any emergency health condition or other exigency that would render delay impossible). The claim does not seem ripe. To put this in administrative terms, the parties have failed to exhaust their remedies. Indeed, I could not find a single case where next-of-kin was able to file suit to complain while a visa application was pending. Nothing on the face of the complaint suggests why the fear of denial is credible, especially in light of the fourth waiver category. Immigration lawyers often complain that delays in visa processing are interminably long—but they cannot go to federal court to compel a decision.

The court should not grant preliminary relief on this premature claim. If the visa is denied, presumptively her son-in-law could bring an as-applied suit. (I’ll reserve judgment on whether that suit would succeed, but at least it would be ripe). If the State Department issues the mother-in-law a visa, promptly, this plaintiff’s claim becomes moot and should be dismissed.


Capping Refugee Entry

The executive order categorically excludes lawful permanent residents, as well as other aliens with strong connections to the United States. The executive order further presumptively excludes students who were already admitted to the United States, as well as aliens who are close family members to U.S. persons. Who is left over? Aliens from these six nations who have never entered the United States, have no relatives in the United States, and have never received any travel document from the United States. The category of aliens who are actually excluded, and who would actually seek to visit the United States—that is, not just for purposes of ginning up standing in these lawsuits—is likely small. (The narrow reach of this executive order, in light of its negligible national security benefits, continues to leave doubt in my mind about the wisdom of this policy, but that is a separate question from whether it is lawful).

Primarily, this order will affect refugees from the six-named nations who have not yet entered the United States. Making this point explicit, Section 6 “realign[s]” the refugee admissions program. Section 6(a) provides that for 120 days from the date of the order, “[t]he Secretary of State shall suspend travel of refugees into the United States.” Further, for 120 days, “the Secretary of Homeland Security shall suspend decisions on applications for refugee status,” subject to waivers so long as their entry “is in the national interest and does not pose a threat to the security or welfare of the United States.” Refugees who have not yet been admitted have zero due process liberty interests. Further, they lack any statutory right to enter. Because refugees do not receive visas, 8 U.S.C. § 1152(a)(1) is inapplicable.

Beyond this temporary suspension of entry and processing of refugee applications, Section 6(b) determines that under Section 212(f) of the INA, the “entry of more than 50,000 refugees in fiscal year 2017 would be detrimental to the interests of the United States, and thus suspend any entries in excess of that number.” David Cole of the ACLU asserts that this reduction is illegal.

It maintains the first executive order’s unilateral reduction of the annual limit on refugee admissions from 110,000 to 50,000. That reduction, imposed unilaterally by the president without consultation with Congress, is unauthorized. The immigration statute does not allow the president to order a mid-year reduction in the level of refugee admissions—which no president has ever done before—much less to do so without consulting Congress . . . . In unilaterally cutting the refugee cap, at a time of virtually unprecedented world need for refugee placements, President Trump is not only acting unilaterally but in violation of the statute that establishes the process for setting the cap in the first place.

Cole is indeed correct that President Obama’s budget established that for the current fiscal year, as many as 110,000 refugees could be admitted. But there is absolutely no statutory requirement that the President must admit that many.

8 U.S.C. § 1157(a)(2) provides:

Except as provided in subsection (b), the number of refugees who may be admitted under this section in any fiscal year after fiscal year 1982 shall be such number as the President determines, before the beginning of the fiscal year and after appropriate consultation, is justified by humanitarian concerns or is otherwise in the national interest. (emphasis added).

The statute provides that the number submitted by the President is the number of “refugees who may be admitted,” not “shall be admitted.” This is a typical case in immigration law where Congress establishes a ceiling, but not a floor. In other words, Congress agreed to admit no more than 110,000 refugees this fiscal year, but in no sense did it require the executive branch to admit precisely that number. The concern was about accepting too many, not too few. Imagine if, for whatever reason, the number of refugee applications was less than the number submitted to Congress. (World peace emerges!). If there aren’t enough applicants, the President could in no sense meet that threshold. Would he be breaking the law for not admitting enough refugees? Of course not. (Here, I am focusing only on the statutory argument, and tabling for a moment the challenger’s pretextual arguments, which invariably bleed into the Establishment Clause; that is, the reduction is motivated by anti-Muslim animus. Stay tuned for Part III.).

Further, even if the statute did mandate that a certain number of refugees must be admitted, the President would have a very, very strong Article II override argument that being required to admit a certain number of refugees, in light of changed world conditions, would encroach on his executive powers. For example, imagine if when the budget was approved, relations between the United States and Syria were conducive to the admission of refugees. Mid-year, relations deteriorate, and the President determines that it is no longer in the American interest to admit Syrian refugees. Under the President’s Article II powers, a statute that required their admission would be unconstitutional. This conclusion is bolstered by Zivotofsky II. If Congress could not command the President to “recognize” a foreign nation in the form of domestic passports, it cannot be the case that Congress must require the President to admit refugees from certain nations, in light of changed diplomatic concerns. Section 1157 should be read to avoid these constitutional difficulties.

The converse is also true. If the President determines that the interests of the United States compels the admission of more refugees—such as during a war in an allied nation—I don’t think any act of Congress could stop that. To that end, 8 U.S.C. § 1157(b) specifically countenances the President admitting additional refugees in response to “unforeseen emergency refugee situations.”

This is not a rigid statute, but one that permits the President to act unilaterally to admit fewer refugees as the circumstances dictate, and to act unilaterally to admit more refugees in the event of an emergency.


To Whom Is Process Due

Beyond refugees, there exists a subset of nationals from these six nations who have never entered the United States, have no connection or relatives in the United States, but who now assert an interest in travelling to Washington. Maybe a student in Syria who seeks to pursue a degree at the University of Washington? Or an Iranian engineer who seeks to work at Microsoft? You get the gist. Certainly Washington can locate such individuals who can sign affidavits to that affect. (That Washington hasn’t yet filed an amended complaint suggests that they are scrambling to find aliens who actually face a credible risk of being denied entry based on the new executive order—easier said than done).

Are such individuals protected by the Due Process clause? That is, do they have some cognizable liberty interest that demands due process of law? The Ninth Circuit explained that its holding in Washington v. Trump would persist even if “lawful permanent residents were no longer part of this case.” There is zero precedent to support this claim—well, other than the panel’s own ipse dixit. (See my earlier Lawfare post for an explanation of why the Ninth Circuit’s reasoning was utterly unpersuasive and, at times, misleading).

The judges attempt to fudge this lack of precedent, noting that “The Government has provided no affirmative argument showing that the States’ procedural due process claims fail as to these categories of aliens,” where “these categories of aliens” applies (presumably) to all aliens affected by the Executive Order, other than LPRs. This burden is manufactured. No court has ever held that aliens that are seeking entry, who have zero connection to the United States, or its residents, have due process rights.  Indeed, the leading cases Washington relied on—Kleindienst v. Mandel and Kerry v. Din—both involved cases where aliens had a close business or familiar relationship with U.S. citizens. If the Ninth Circuit truly wants to hold that aliens who have zero past connection have due process rights if a visa is denied, that would be a revolutionary change to immigration law. No doubt, some advocates would welcome such a change, but we should be frank that this is not the proverbial one-way ticket. There is no way to gerrymander such a ruling, and limit this principle to the context of the executive order. Aliens from around the world could now avail themselves of Article III courts to seek visas and entry.

Finally, with respect to due process, the Ninth Circuit held, without citing any authority, that aliens overseas—even those with zero prior connection to the United States—are entitled to “notice and a hearing prior to [the government] restricting” their “ability to travel. This holding was made up out of whole cloth. Such a holding, if applied in other contexts, would yield a fundamental transformation for the doctrine of consular review. Even under Justice Kennedy’s concurring opinion in Kerry v. Din, all the process that is due is a final decision from a consular official that the alien will not be permitted to enter the United States pursuant to the executive order.

In short, the small subset of aliens who would in fact be denied entry under this policy have no cognizable due process rights, and to the extent that courts find some interest exist, the review and denial by a consular officer provides all the process that is due.


In Part III, I will assess how the revised order impacts the Equal Protection and Establishment clauses analyses.

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“We Love the Constitution” – Live from Signer’s Hall at the National Constitution Center

The National Constitution Center and iCivics partnered for a video series, titled “We Love the Constitution.” Leading figures, such as Justice Ginsburg, Tom Brokaw, Adam Liptak, and dozens of others offered their take. During my recent visit to the Constitution Center for a discussion on the future of the Affordable Care Act, I decided to not only tell you why I love the Constitution but to show you.

Walking around Signer’s Hall, I highlighted the accomplishment of several of my favorite framers, including George Washington, James Madison, Alexander Hamilton, and, of course, George Mason.

I recorded this in one take, with no notes. All things considered, it came out quite well.

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Media Hits, Commentary, and Events from 3/6/17 to 3/12/17

Here are my media hits, commentary, and events from the past week.


  • Panelist at National Constitution Center event on the Future of the Affordable Care Act (Mar. 6, 2017) (Video).


  1. The Legality of the 3/6/17 Executive Order, Part I: The Statutory and Separation of Powers Analyses, Lawfare (Mar. 11, 2017).
  2. Obamacare is unlikely to survive even if it is repaired, Philadelphia Inquirer (Mar. 5, 2017).




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The Enduring Potency of the Liberty Argument Against the Individual Mandate

Over the past week, debates about repealing the individual mandate has triggered the strongest sense of déjà vu. During the run-up to NFIB v. Sebelius, one of the most potent arguments against the law was what I would broadly refer to as the “liberty” argument. That is, Congress can’t force people to buy insurance. Or, as it was often described, the government can’t force you to buy broccoli.

True, the case was not premised on a substantive due process liberty interest (though such a claim was dismissed by the district court, and was dropped on appeal). However, the arguments against the mandate wove together closely the notion of structural federalism and individual freedom.

Chief Justice Roberts, citing from New York v. U.S., observed for the majority, that “State sovereignty is not just an end in itself: Rather, federalism secures to citizens the liberties that derive from the diffusion of sovereign power.”

Justice Kennedy’s statement from the bench made this point far more directly:

“Structure means liberty, for without structure, there are insufficient means to hold to account a central government that exceeds its powers in controlling the lives of its citizens. Today’s decisions should have vindicated, not ignored, these precepts. For these reasons, we would find the act invalid in its entirety.”

Five years later, the “liberty” argument retains its resonance.

Consider Paul Ryan’s colloquy this morning on Face the Nation–pay attention to his invocation of “freedom” from the mandate:

RYAN: The score, we believe, will come out probably Monday or Tuesday, well before we go to the floor. Well before we go to the floor we’ll have the score. The one thing I’m certain will happen is CBO will say, well, gosh, not as many people will get coverage. You know why? Because this isn’t a government mandate. This is not the government makes you buy what we say you should buy, and therefore the government thinks you’re all going to buy it. So there’s no way we can — you can compete with on paper a government mandate with coverage.

What we are trying to achieve here is bringing down the cost of care, bringing down the cost of insurance, not through government mandates and monopolies, but by having more choice and competition. And by lowering the cost of health care, you improve the access to health care. And by having the things that we’re talking about, tax credits, risk pools, health savings accounts, you dramatically increase the access to health care, but we’re not going to make an American do what they don’t want to do. You get it if you want it. That’s freedom.

DICKERSON: How many people are going to lose coverage under this new —

RYAN: I can’t answer that question. It’s up to people. Here — here’s the premise of your question. Are you going to stop mandating people buy health insurance? People are going to do what they want to do with their lives because we believe in individual freedom in this country. So the question is, are we providing a system where people have access to health insurance if they choose to do so? And the answer is yes. But are we going to have some nice looking spreadsheet that says we, the government of the American — of the United States are going to make people buy something and, therefore, they’re all going to buy it? No. That’s the fatal conceit of Obamacare in the first place.

So it’s not our job to make people do something that they don’t want to do. It is our job to have a system where people can get universal access to affordable coverage if they choose to do so or not. That’s what we’re going to be accomplishing.

Scholars who scoffed at the challenge to the mandate never fully embraced the intrinsic affront to laymen of the federal government forcing them to buy health insurance. Ryan is trying to channel, and perhaps reignite that latent sentiment.

Ryan’s answer also is quite candid. The Congressional Budget Office has long assumed that the mandate was far more effective than it actually was to increase enrollment. (See my earlier post). If more people are exempted from the coverage requirement, then more people will choose to go uninsured. So the decrease in coverage numbers will, at least in some measure, be the result of individual autonomy.

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The Accuracy of the CBO’s Obamacare Forecasts

Reports have suggested that the Congressional Budget Office will release their analysis this week of the American Health Care Act, including the all-important forecast of how many Americans will lose coverage. The office’s track record is, well, not very good. CBO vastly overestimated the number of Americans who would enroll on the exchanges and pay the individual mandate penalty. Each year, CBO revised their estimates lower and lower, and still never quite predicted how weak the enrollment would be. This post is not meant as a critique of CBO’s methodology, but rather a frank recognition that even the best experts cannot predict, with any accuracy, the impact of such a massive government program. Indeed, in June 2014, CBO threw in the towel on scoring Obamacare’s complete impacts:

“The provisions that expand insurance coverage established entirely new programs or components of programs that can be isolated and reassessed,” the office wrote.

“In contrast, other provisions of the Affordable Care Act significantly modified existing federal programs and made changes to the Internal Revenue Code.

“Isolating the incremental effects of those provisions on previously existing programs and revenues four years after enactment of the Affordable Care Act is not possible.”

In the Epilogue of Unraveled, I tracked the accuracy of CBO’s forecasts concerning the Affordable Care Act from 2009 to 2015.  I will reproduce that section here.

Enrollments on the ACA Exchanges

Chapters 14 and 18 recounted the stunning turnaround of, as 8 million customers enrolled by April 2014. In light of the botched launch of the website six months earlier, this result was nothing short of miraculous. However, the enrollments on the exchanges lag far, far behind government estimates. To assess these gaps, Table E. 1 provides forecasts from the Centers for Medicare and Medicaid Services (CMS) in 2010 – before the ACA passed the House – and from the Congressional Budget Office (CBO) in 2010, 2012, 2013, 2014, 2015, and 2016.30 These predictions are contrasted with the actual number of enrollees, and the number of enrollees who continued to pay their premiums throughout the year.

In 2014, Obamacare met the CBO’s original goal from 2010, as well as the average forecast, with 8 million enrollments. This was truly a red-letter year for the ACA, demonstrating that there was strong demand for the exchange policies. After 2014, however, the demand has leveled off. In 2015, there were 11.7 million enrollments, far fewer than the CBO’s average forecast of 13.25 million. From 2010 through 2015, CBO consistently predicted that enrollments would spike up in 2016, with 20– 24 million enrollments. For example, in its February 2014 report, CBO wrote that “more people are expected to respond to the new coverage options, so enrollment is projected to increase sharply in 2015 and 2016.”

The surge never happened. In March 2016, CBO drastically downgraded its forecast by half to 10 million enrollees. As of July 2016, there have been 12.7 million confirmed enrollees on the exchange – beating the revised 10 million figure, but falling significantly short of the expected 20 million. Brian Blase, of the free-market Mercatus Center, observed that the “magnitude of how wrong the initial predictions appear to be should cause legislators and the public to approach future estimates of the impact of major legislation cautiously.” 31 Contrary to the forecasts, he wrote, “people [found] exchange plans so much less attractive than experts assumed when the law was passed,” and even after two years of the marketplace being open. The ACA’s expansion of coverage to 20 million Americans is still far short of even its most conservative estimate of more than 30 million Americans gaining coverage.

As weak as these enrollment numbers are, the actual numbers of customers who continued to pay their policies for nine consecutive months is even lower. In 2014, only 6.7 million out of 8 million enrollees paid their premiums through September. 32 This 19% drop-off puts the 2014 figures well below the CBO forecasts. In 2015, only 9.3 million out of the 11.7 million paid their premiums through September. 33 More than 25% of enrollees failed to consistently pay their bills. In 2016, only 11.1 million out of 12.7 million paid their premiums through March, with an expected 10 million to continue paying through September. 34 Factoring in customers who actually continue to pay for coverage, the state and federal risk pools are barely at 50% of their anticipated size.

The underpayment problem is even more severe because savvy shoppers have learned to game the system: they sign up, receive treatment, and cancel coverage. The ACA was designed to only allow people to sign up at specific times to frustrate this opportunism. In 2009, CBO wrote that in addition to the individual mandate, the ACA’s “annual open enrollment period” would tend to mitigate … adverse selection.” 35 In his brief to the Supreme Court, the solicitor general explained that restricting enrollment to a fixed period “would reduce opportunities for healthy people to wait until illness struck before enrolling.” 36

However, in order to boost raw enrollment numbers, the Obama administration consistently delayed signup deadlines. 37 According to the New York Times, HHS created more than thirty “special enrollment” windows, many of which were only mentioned in “informal ‘guidance documents.’” 38 For example, customers were allowed to sign up late due to unspecified “exceptional circumstances,” “serious medical condition[ s],” and – the most capacious standard – “other situations determined appropriate” by HHS.

The first special enrollment period came shortly after the pivotal March 31, 2014 deadline. Customers were allowed to continue signing up in April. In addition, the Johnny-come-latelies were excused from the individual mandate’s penalty. 39 The Hill reported that the “move essentially nullifies the month of April for the purposes of enforcing the mandate.” 40 Until the very end, the goalposts kept moving to ensure as many people as possible were able to get covered.

In February 2015 – after the regular enrollment period concluded – the Obama administration created another special enrollment period. To qualify, customers had to demonstrate that they were subject to the penalty in 2014 and “first became aware of, or understood the implications of” it when preparing their 2014 return. In other words, people who went uninsured in 2014, and missed the enrollment period in 2015, were able to sign up late because they were unaware that they had to pay a penalty until they did their taxes.

The National Association of Insurance Commissioners complained that “consumers are not required to provide documentation to substantiate their eligibility for a special enrollment period.” 41 Kaiser Permanent, a large health insurer, said that the potential for abuse “poses a significant threat to the affordability of coverage, and to the viability” of the exchanges. In 2016, the Government Accountability Office (GAO) concluded that HHS “has assumed a passive approach to identifying and preventing fraud.” 42 The agency’s honor system policy “allowed an unknown number of applicants to retain coverage, including subsidies, they might otherwise have lost, thus producing higher costs for the federal government.”

Leading insurance companies submitted regulatory comments to HHS, warning that the extra signup windows risked destabilizing the insurance markets. 43 Blue Cross Blue Shield explained that “individuals enrolled through special enrollment periods are utilizing up to 55 percent more services than their open enrollment counterparts.” Aetna added that “many individuals have no incentive to enroll in coverage during open enrollment, but can wait until they are sick or need services before enrolling and drop coverage immediately after receiving services … less than four months” later. United Healthcare, which will exit from most of the Obamacare exchanges in 2017, explained that more than 20% of its customers signed up during a special enrollment period, and they used 20% more health care than those who enrolled during the regular enrollment period. 44 Anthem told the government that these modifications of the deadlines were “harming the stability of the exchange markets and resulting in higher premiums.” The Obama administration’s sign-up-as-many-people-as-possible approach has eliminated one of the key constraints embedded in the ACA and reduced the force of the individual mandate.



Suspending the Individual Mandate

Because insurers could no longer discriminate against customers with preexisting conditions – due to the guaranteed-issue and community-rating provisions – customers could free-ride and “wait to purchase health insurance until they needed care.” 45 As the United States explained to the Supreme Court, this free-riding “would drive up premiums and threaten the viability of the individual insurance market.” 46 The individual mandate was designed to solve this problem. President Obama explained the simple economics behind the mandate during a February 2014 radio appearance: “If you can afford [insurance], and you don’t get it, you’re going to pay a fee. So you might as well just go ahead and get health insurance instead of paying a penalty with nothing to show for it.” 47

Solicitor General Verrilli warned the Supreme Court that the ACA operating without an individual mandate would “create an adverse selection cascade,” the dreaded death spiral, “because healthy individuals would defer obtaining insurance until they needed health care, leaving an insurance pool skewed toward the unhealthy.” Without the mandate, Verrilli wrote, “premiums would increase significantly” and “the availability of insurance would decline.” This implosion, the government explained, was “exactly the opposite of what Congress intended in enacting the Affordable Care Act.” The mandate was essential for nudging the uninsured into the health care market. Yet, the mandate would never go into effect as designed. The government’s numerous exemptions from the mandate’s penatly risked the very parade of horribles the government warned about.

In addition, the revenue generated from the penalties was designed to offset the cost of expanding coverage. In 2015, the penalty for an adult was $ 325, and $ 975 for a household. 48 Table E. 2 provides CBO’s projections of penalty payments (in billions) that the individual mandate was expected to generate.

Like the exchange enrollment numbers, the collected penalty revenue has lagged far behind original estimates. But there is an incongruence to these forecasts. The number of people who have gained covered on the ACA exchange is far fewer than originally forecasted: 10 million instead of 20 million. As a result, more people who otherwise would have obtained coverage, should now be subject to the mandate’s penalty. The revenue should be far greater than originally predicted. But the exact opposite happened. As time progressed, and it became clear that the ACA would fall far short of its projected enrollment numbers, CBO downgraded its forecast for the penalty payments. For example, shortly after the Supreme Court upheld the ACA in NFIB v. Sebelius, CBO expected the individual mandate would generate $ 3 billion in 2015, $ 6 billion in 2016, and $ 7 billion in 2017. In February 2014, CBO revised its forecast for that year to $ 2 billion. Ultimately, it was even less than that. John A. Koskinen, the Commissioner of the Internal Revenue Service, reported to Congress that 7.5 million taxpayers paid an average of $ 200 in penalties, totaling $ 1.5 billion in penalties for 2014.49 CBO’s most recent forecast further lowered its expectations. The budget office predicted a flat $ 3 billion in revenue in 2016 and 2017, and shrank the eleven-year total to $ 38 billion. These numbers do not add up.

Some of this discrepancy is due to fact that fewer business than expected have not cancelled employer-provided plans. “Employers have not ‘dumped’ employees to the extent that some people feared and predicted,” said Ceci Connolly of the Alliance of Community Health Plans. But that explains only part of the gap. 50 A more complete explanation for this incongruence considers the effect of the executive’s actions, which have unexpectedly excused millions of taxpayers from the penalty. In June 2014, CBO wrote that its downward forecast for penalty payments was due “in part to regulations issued since September 2012 by the Departments of Health and Human Services and the Treasury.” 51 As a result, there is “an increase in [its] projection of the number of people who will be exempt from the penalty.” 52

According to the IRS commissioner, 12.4 million taxpayers claimed an exemption from the mandate for 2014.53 Koskinen explained that many taxpayers claimed an exemption because “health care coverage [was] considered unaffordable.” This is not one of the exemptions carved out by Congress in the ACA. 54 Rather, this was a consequence of the president’s executive action in December 2013, which waived the individual mandate’s penalty for taxpayers who told the government that a new policy was too expensive. Recall from our discussion in Chapter 13 that applicants were on the honor system, and their request was not subject to any verification.

At the time, ACA supporters downplayed any impact the waivers would have on the markets. MIT Economist Jonathan Gruber said it was “not an imminent threat to the individual mandate” because it would only be used for “extreme hardships.” 55 This was originally viewed as only a temporary measure. However, four months later, it was extended. In a brief footnote in a seven-page technical bulletin, the government quietly noted that the fix would be extended for two more years until October 1, 2016.56 Once again, applicants were on the honor system, and only had to tell the government they “find other options to be more expensive.”

The Wall Street Journal warned that the never-ending hardship exemption was a “regulatory loophole” that “sets a mandate non-enforcement precedent.” It becomes more and more difficult to eliminate the exemptions for people who cannot afford policies. “The longer it is not enforced,” the Journal noted, “the less likely any President will enforce it.” 57 Kathleen Sebelius defended the waiver to the House Ways & Means Committee. “The hardship exemption was part of the law from the outset,” she said. “There was a specific rationale there, and it starts with the notion that if you can’t afford coverage you are not obligated to buy coverage.” 58 But as we discussed in Chapter 13, the ACA carved out specific income requirements to qualify a hardship exemption. It does not count if Obamacare’s mandates made insurance too expensive. Obamacare itself cannot be the hardship.

The shortfall in individuals paying the penalty can also be attributed to the president’s “if you like your plan, you can keep your plan” administrative fix. Through this November 2013 policy, the federal government allowed insurance companies to continue offering plans that did not comply with the ACA’s strict coverage requirements. Individuals who remained on these grandfathered plans, which did not provide “minimum essential coverage,” would be excused from the individual mandate’s penalty. There were risks to allowing people to remain on old plans. Jim Donelon, president of the National Association of Insurance Commissioners, warned that the administration’s decision “threatens to undermine the new market, and may lead to higher premiums and market disruptions in 2014 and beyond.” 59 Moody’s Investor Service forecasted that the administrative exemption would result in “exposure to adverse selection” and was “likely to negatively affect earnings in 2014.” 60 Harvard economist David Cutler was more cautious. “If it turns out to be a delay of a year, then we can work through that,” he told Megyn Kelly on Fox News. 61 “If it becomes a permanent situation that people who are healthier stay away and people who are sicker go into the exchanges, that becomes a very big problem. That could be the beginning of a death spiral. That is, you could have a situation where people in the exchanges are very unhealthy people with high premiums.”

The fix was originally slated to provide temporary relief for one year. However, that would have resulted in millions of plans being cancelled in the fall of 2014, on the eve of the midterm elections. The president would not let that happen. HHS announced that noncompliant plans could be grandfathered through the end of 2016.62 Insurers were now able to renew noncompliant policies as late as October 1, 2016, so coverage could continue past the next presidential election into 2017. The New York Times observed this action “essentially stall[ s] for two more years one of the central tenets of the much-debated law, which was supposed to eliminate what White House officials called substandard insurance and junk policies.” 63

The Hill reported that the delays would avert the “firestorm for Democratic candidates in the last, crucial weeks before Election Day” 2014.64 Former-House Majority leader Eric Cantor charged that the president “is once again trying to hide the effects of Obamacare. It is not fair to pick and choose which parts of an unpopular law should be enforced.” 65 Senate Republican leader Mitch McConnell said the delay was “a desperate move to protect vulnerable Democrats in national elections later this year.” 66 Indeed, in announcing the policy, HHS said it was crafted “in close consultation” with three Senate Democrats in vulnerable seats: Mary L. Landrieu of Louisiana, Mark Udall of Colorado, and Jeanne Shaheen of New Hampshire. 67 Only Shaheen was reelected.

Extending the grandfathering of noncompliant plans, health care industry consultant Robert Laszewski observed, “tends to undermine the sustainability of Obamacare” because it reduces incentives for customers to purchase policies on the exchanges. 68 And more likely than not, these grandfathered customers are younger and healthier, because they were able to obtain insurance even before the ACA’s guaranteed-issue requirement kicked in. The “administrative fix” has inhibited the exchanges from attracting the young and healthy members who were essential to stabilizing the risk pools. Alan Murray of CareConnect, a New York healthcare plan, observed that after two years, “everybody who’s in the individual market on average is not as healthy as we were led to believe.” 69

The government has not announced how many people benefited from the administrative fix, but we can hazard a guess. A McKinsey report estimated that 3.7 million Americans were still using noncompliant plans that otherwise would have been cancelled under the ACA. 70 An October 2013 Gallup poll found that “[ n] early two in three uninsured Americans say they will get insurance by Jan. 1, 2014, rather than pay a fine as mandated by the Affordable Care Act (ACA), while one in four say they will pay the fine.” 71 If we assume that 2/ 3 of the 3.7 million people whose plans were grandfathered, would have otherwise purchase insurance the exchange, the ranks would have increased by another 2.5 million customers. Assuming the other one-fourth chose to pay the penalty – which averaged $ 200 in 2014 – it would have generated nearly $ 200,000,000 in revenue.

These were only two in a series of ad hoc, unpublicized waivers the Obama administration issued. The New York Times reported that the White House “has already granted … 30 types of exemptions.” 72 The myriad exemptions have skewed the risk pools with older, and sicker, customers, which further drives up premiums, making future policies even less attractive. 73 By exempting millions of Americans from the individual mandate, the Obama administration disturbed the fragile balance Congress designed to prevent an adverse selection death spiral.

Delaying the Employer Mandate and the Cadillac Tax

The ACA’s employer mandate requires businesses with more than 50 workers to pay a fine of $ 2,160 for each uninsured employee. In July 2013, the Obama administration announced that the employer mandate would not be enforced in 2014. Seven months later, the administration further postponed the mandate for 2015. Businesses with between 50 and 100 employees were excused from the mandate entirely. Businesses with more than 100 employees would be excused from the penalty so long as 70% of their employees were covered. Starting in 2016, businesses that cover 95% of its workforce will not have to make the payments. (Chapter 13 discussed how none of these requirements were consistent with the statute.) Additionally an unknown number of waivers were granted to favored employers.

The Congressional Budget Office’s downward-sloping forecasts, represented in Table E. 3 reflect this tinkering with the employer mandate. Initially, the mandate was expected to generate $ 24 billion by 2016. After the president’s executive actions, it generated $ 0 through 2016. Additionally, the expected revenue from 2014 through 2019 dropped from $ 65 billion to $ 45 billion. Far fewer employers will be hit with the penalty and have an incentive to provide their workers with insurance.



The ACA’s Cadillac tax imposes a 40% excise tax on generous health insurance plans starting in 2018. Popular among economists, the provision would have created an incentive for firms to reduce health care costs. Unpopular among workers – particularly labor unions with gold-plated insurance plans – the excise tax did not stand a chance. Despite President Obama’s initial objection, in December 2015 he approved of Congress’s two-year delay of the Cadillac tax. As a result, the excise is not scheduled to go into effect until 2020. As we discussed in Chapter 29, it is unlikely this unpopular provision will ever go into effect. This delay has greatly altered the revenue the Cadillac tax was expected to generate, as illustrated by Table E. 4.

Under the CBO’s initial estimate, employers were expected to pay $ 110 billion in taxes for Cadillac plans between 2018 and 2022. This payment was a pivotal offset in order for the ACA to achieve a budget-neutral scoring. Now, with the delay of the Cadillac Tax, CBO only projects the excise will generate $ 19 billion through 2022. This number could very likely drop to $ 0 if the Cadillac Tax is perpetually delayed. When assessing a law that transformed nearly 20% of the U.S. economy, it is not enough to focus only on how many people gained coverage; we must also consider the costs of achieving this goal. The Affordable Care Act has fallen far short of its great expectations.



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