If Obamacare Is Overturned, Case Western Law Prof. Jonathan Adler gets the Credit

Stephen Koff writes in the Cleveland Plain Dealer:

If the law known as Obamacare gets struck down in the latest court challenge, the victors will thank a Hudson resident and Case Western Reserve University law professor who discovered what the law’s critics say is a major flaw.

Jonathan Adler, 44, says he didn’t even appreciate initially how significant his discovery might be. He thought it was an interesting bit of legal arcana, worthy of scholarship. But his analysis of the Affordable Care Act, or ACA, has led to four pending cases in federal courts, two likely to be decided within months, that offer ACA opponents their best chance of gutting the law.

Oral arguments were heard in one of the cases, in U.S. District Court in Washington, DC, on Tuesday.

Adler, a Case law professor since 2001, pored over the ACA after it passed in 2010 and found this:  Congress created a system for providing tax subsidies  and penalties in order to give incentives for people to buy health insurance or for employers to provide it. States were supposed to create new agencies that would offer online insurance-shopping options, and states would tie into a federal tax system to dole out the subsidies and assess the penalties.

But the ACA made clear, Adler says, that the subsidies were to be used in these new state marketplaces, or “exchanges.” There is no record, he says, that shows Congress directed the subsidies to what has since evolved: a large, federally run, health-policy shopping exchange. When the subsidies are mentioned in the law, Adler says, it is always and only in the context of state exchanges.

Congress did provide for the creation of a federal exchange, but as a backup, Adler says.

Things haven’t worked out that way. When the law was put into practice, 27 states, including Ohio, said they did not want to start their own exchanges or partner with the federal government for a jointly run exchange. They are using the federal system instead, forgoing federal grants that would have helped them establish their own marketplaces. According to the Pew Research Center, that means nearly 60 percent of Americans who lack insurance live in states that refused to have their own exchanges.

Based on the law, Adler says, the Internal Revenue Service has no legal authority to give tax subsidies to people enrolling in the federal exchange. The IRS wrote a regulation as if it has that right, but Adler says the ACA never empowered it to do so.

Although this particular issue involves the signature law of President Barack Obama’s White House, there have been legal parallels with the desires of other administrations, including President George W. Bush’s, on environmental and other matters, Adler says.

“In none of these areas does that authorize the administrative agencies to rewrite the laws altogether,” Adler said in a telephone interview this morning with The Plain Dealer. “They’ve got to go back to Congress.”

This may sound like a novel theory for the policy and law blogs, some of which Adler participates in. He initially used his research for a paper that he presented at a legal conference at the University of Kansas in February of 2011.

But then a friend and influential health-policy analyst, Michael Cannon at the libertarian-leaning Cato Institute, a Washington think tank, told Adler that he was onto something big — something that could profoundly affect Obamacare.

Without the tax subsidies, the ACA cannot work. . . .

In June 2013, Professor Adler participated in a panel on the “Implementation of the Affordable Care Act” the Federalist Society’s First Annual Executive Branch Review Conference. Also participating were James C. Capretta,  Visiting Fellow at the American Enterprise Institute; Ian Millhiser, Senior Constitutional Policy Analyst at the Center for American Progress, and Terry Eastland, Publisher of The Weekly Standard. You can watch a video of the event here.