It’s been a busy Obamacare week. Last week Halbig and King dropped on the same day. This morning Sissel, the origination clause challenge dropped. And now, there is a new Obamacare challenge.
In West Virginia v. HHS, the Attorney General of the Mountain State is challenging the President’s “administrative fix” to Obamacare. After the President’s promise that “if you like your plan, you can keep your plan” proved to be the “lie of the year,” the Administration unilaterally changed the law to allow people to keep illegal plans. Specifically, the “fix,” which was not subject to the notice-and-comment process, gave state insurance commissioners the burden of allowing insurers to sell these illegal plans. West Virginia is asserting an injury based on this change.
Here is the key paragraphs describing the violation of the law:
Adopted without any advance notice or opportunity for public comment, the Administrative Fix unilaterally suspends federal enforcement of the ACA against individual plans made illegal by the ACA and fundamentally transforms what Congress intended to be a regime of “cooperative federalism.” Prior to the Administrative Fix, the ACA gave the States the option of enforcing the law’s federal requirements against non-compliant individual health plans, but required the federal Department of Health and Human Services to enforce the requirements if the States declined to do so. The States thus had no authority over whether the federally mandated requirements would ultimately be enforced. But under the Administrative Fix, HHS abdicated its enforcement role and left the States solely responsible—and accountable—for deciding whether federal law would be enforced. …
The Administrative Fix is an unlawful agency rule for several reasons.
a. First, it is contrary to the ACA. Under the ACA’s enforcement scheme, HHS “shall enforce” the Act’s eight market requirements against individual health plans if the States do not do so. Put another way, the ACA sets up a mandatory regime of cooperative state/federal enforcement. The Act prohibits HHS from leaving enforcement discretion over the ACA’s eight federal market requirements solely to the States.
b. Second, the Administrative Fix was promulgated without public notice and opportunity to comment as required by the Administrative Procedure Act.
c. Third, the Administrative Fix constitutes unlawful delegation of federal executive and legislative powers by the Executive Branch to States.
There are strong parallels to the proposed Boehner suit, which faults the President for suspending the requirements of the ACA, and taking care that the laws are faithfully executed.
The primary hurdle here, as always, is standing. While the complaint does not sketch out in detail, it alludes to a “political accountability” theory of standing, based on Justice O’Connor’s opinion in New York v. United States. I discussed some of these themes in this post. In short, the President shifted the burden of enforcing the law onto the state, thus distorting who bears political accountability for decisions.
With the Administrative Fix, the President intentionally and improperly sought to shift to the States the potential political burden for the cancellation of individual health plans. In announcing the new rule, he explained his desire “to be able to say to these folks, you know what, the Affordable Care Act is not going to be the reason why insurers have to cancel your plan.” He stressed that after the Administrative Fix, it would be “state insurance commissioners [who] still have the power to decide what plans can and can’t be sold in their states.” Although the ACA still makes it unlawful to renew an individual plan that does not comply with the law’s federally mandated market requirements, the President has attempted to transfer the legal and political responsibility to the States by giving them exclusive authority to determine whether to actually enforce the ACA’s prohibition.
The complaint ties in this theory of standing directly into 10th Amendment sovereignty:
d. Fourth, the Administrative Fix violates the States’ sovereignty under the Tenth Amendment and interferes with constitutional principles of federalism. By making States solely responsible for determining under federal law whether plans made illegal by the ACA must be cancelled, the President has unlawfully conscripted States into federal service, making them part of the federal regulatory system and deliberately “diminish[ing]” “the accountability of . . . federal officials” at the expense of the States. New York v. United States, 505 U.S. 144, 168 (1992).
And views the injury to WV from the fix in terms of reducing political accountability:
67. By fundamentally changing the cooperative federalism regime created by the ACA for enforcement of the eight federally mandated market requirements against non- compliant individual health plans, the Administrative Fix has harmed all States, including the State of West Virginia.
68. First, the State has been injured by the Administrative Fix by being forced to become the sole and exclusive enforcer of federal law within its borders.
69. Second, the Administrative Fix reduced the political accountability of the federal government at the expense of the States.
With the fix, the lines between the federal and state regimes are blurred.
70. Prior to the Administrative Fix, there was no question that the federal government was responsible for the ACA’s policy consequences. The federal government—through Congress and the President—adopted the ACA and its eight federal market requirements. Under the cooperative federalism regime provided by the ACA, the States had no authority to decide that individual health plans made unlawful by the ACA could be sold—unpunished—within their borders. While the States could defer punitive enforcement to the federal government by refusing to participate, the ACA gave the States no policymaking discretion over the ultimate enforcement of federal law.
71. Under the Administrative Fix, the lines of political accountability are far less certain. By granting the States dispositive authority over the enforcement of the eight federal requirements and turning the States into federal policymakers, the Administrative Fix creates—at a minimum—confusion as to which government is actually to blame for the ACA’s policies. That confusion exists regardless of whether the States choose to actually enforce the eight federal requirements or not: in either circumstance, the States will be held at least partly accountable by their citizens for having made a federal policy choice.
72. Indeed, the President’s self-described purpose in adopting the Administrative Fix was to shift political accountability away from the federal government to the States. He said: “[W]hat we want to do is to be able to say to these folks, you know what, the Affordable Care Act is not going to be the reason why insurers have to cancel your plan.” Presidential Press Conference, Exh. 4 at 4. He specifically noted that after adopting the Administrative Fix, it would be the “state insurance commissioners [that] still have the power to decide what plans can and can’t be sold in their states.” Id. at 2; see also Administrative Fix Fact Sheet, Exh. 5 at 2 (“Whether an individual can keep their current plan will also depend on their insurance company and State insurance commissioner – but today’s action means that it will no longer be implementation of the law that is forcing them to buy a new plan.”).
73. Consistent with the President’s goal of blurring political accountability, HHS formalized the Administrative Fix by sending to all state insurance commissioners a letter that made clear that the burden was on the States to decide whether to “adopt the same transitional policy.” Administrative Fix Letter, Exh. 6 at 3.
74. Similarly, in the Extension Rule, HHS repeatedly stated that enforcement was now “the option of the States” and also described in detail the actions that States could (and would need to) take to allow their citizens to benefit from the extended Administrative Fix. Extension Rule, Exh. 8 at 2.
75. The States are clearly the targets of the Administrative Fix.
76. This blurred political accountability diminishes the sovereignty of West Virginia and all other States by interfering with the relationship between state officials and their constituents, inhibiting the ability of elections to properly hold government and public officials accountable, and harming the reputation and dignity of the States and their officials and agencies. See Gregory v. Ashcroft, 501 U.S. 452, 460 (1991) (“Through the structure of its government, and the character of those who exercise government authority, a State defines itself as a sovereign.”).
I discuss this “fix” at some length in my article, Congressional Intransigence and Executive Power.
In the fall of 2013, as expected, nearly 5 million Americans unexpectedly began to receive cancellation notices. In response, at the last conceivable moment, the President unilaterally changed the law. Through a new policy, announced in a letter, the Administration “allowed” insurers to offer plans that did not meet the statute’s requirements, even though they were illegal under federal law. In short, the new policy “grandfathered” plans that were illegal under federal law, and granted blanket hardship exemptions for cancelled plans. “The bottom line,” President Obama said, is that “insurers can extend current plans that would otherwise be canceled into 2014, and Americans whose plans have been canceled can choose to re-enroll in the same kind of plan.” The new policy shifted the burden to the insurance companies, and the state insurance regulators, to figure out how to un-cancel plans on extremely short notice, at a risk of destabilizing the insurance pools.
This “fix” was without any authority, and violated the laws in numerous ways.
While statutes, in general are susceptible to broad executive discretion, there was not even a pretense of statutory basis for this decision not to enforce a linchpin of the entire ACA. “What is the legal basis for this change,” Jonathan Adler asked. “The Administration has not cited any.” Zachary Price, in an article about executive non-enforcement, explained that “The legal basis for this ‘transitional policy’ is not entirely clear.” Price added that the delay “defies the proper understanding of executive duty” and amounts to a “prospective suspension of the law for a specified category of insurance plans.”)
Further, the “fix” passed the buck, and shifted the burden to the states that were unwilling to offer illegal plans.
Further, the executive action “does not change relevant state laws,” Adler explained, as the “legal requirement remains on the books so the relevant health insurance plans remain illegal under federal law.” Thus, another burden was shifted to the state commissioners to bear the “political accountability” of complying with the President’s directive, or complying with ACA’s structuring of the insurance market.
Within hours, state insurance commissioners balked at this immediate and unexpected disruption to their insurance markets.
“It took about three hours exactly for states to start pushing back against President Obama’s request that regulators allow insurance plans to offer current products in 2014. Washington state insurance commissioner Mike Kreidler has announced that he will not allow insurance companies to do so. “In the interest of keeping the consumer protections we have enacted and ensuring that we keep health insurance costs down for all consumers, we are staying the course,” he said in a statement moments ago. “We will not be allowing insurance companies to extend their policies. I believe this is in the best interest of the health insurance market in Washington.”
As a nice historical footnote, after the House passed a bill that would have grandfathered the plans, the President threatened to veto it because it would “sabotage” the law. He then issued the “fix” obviating the need for Senators to take a difficult vote:
Continuing his “We Can’t Wait” mantra, the President explained when he announced the policy, “regardless of what Congress does, ultimately I’m the President of the United States and [the people] expect me to do something about it.” Perhaps what is most remarkable, is that as a few hours before the President announced this new executive policy, he threatened to veto a bill in Congress that would have allowed accomplished the same goal, and allowed insurers to continue offering invalid plans. The bill had passed the House by a bipartisan vote of 261-157, and was headed to the Senate. Faced not with congressional intransigence, but a rare, bipartisan proposal to cooperate and amend the ACA where it was affecting people, the President instead relied on his inherent executive powers. Rather than waiting to veto the bill, he mooted the entire subject by changing the law himself, and taking the issue outside of the legislative debate. (Once the President issued the new policy, Senators had no need to take a difficult vote). In a statement threatening to veto the bill, the Administration claimed that it would “sabotage” the Affordable Care Act. An Act of Congress would not “sabotage” the law. It would change the law. What “sabotages” the law is unilateral executive suspension of the law, without consulting the other branches, which created great instability in the market. In the words of one healthcare wonk, it made a “big mess.”
The complaint makes this point well:
37. Congress began preparing to amend the Act in order to stop the cancellation of health insurance plans. See, e.g., Keep Your Health Plan Act of 2013, H.R. 3350, 113th Cong. (2013); Keeping the Affordable Care Act Promise Act, S. 1642, 113th Cong. (2013). West Virginia and many other States support legislative solutions like these that could lawfully allow individuals to keep their health insurance plans.
38. The President, however, sought to preempt any congressional action that would have addressed the problem legally and led to a permanent cure to the problem. In fact, he formally threatened to veto a bill that would allow people to keep their individual health insurance plans. Office of Mgmt. & Budget, Executive Office of the President, Statement of Administration Policy, H.R. 3350 – Keep Your Health Plan Act of 2013 (Nov. 14, 2013) (attached as Exh. 3).
39. Instead, acting through Defendant HHS, the President unilaterally sought to “fix” the problem administratively for a limited period of time—long enough for him to avoid political accountability.
64. By changing the States’ enforcement roles, the Administrative Fix forces States to become federal policymakers. States now fully control the extent to which the eight federally mandated market requirements will be enforced within their respective States.
65. This is not a situation in which the federal government has chosen not to regulate health insurance, leaving the States free to regulate (or not) according to state law as they see fit.
66. Instead, the ACA prohibits certain individual health plans as a matter of federal law, and the Administrative Fix has now pushed onto the States the sole responsibility for determining the effect to give that federal law.
You can download the complaint here.