Last month, a federal district court rejected the Department of Health and Human Services’ decision not to allow the sale of Plan-B contraception over-the-counter to females under 17. On Tuesday, the Food and Drug Administration (FDA) responded. On Wednesday, the FDA announced it would allow Plan-B to be sold over-the-counter to females 15 and older. Then on Wednesday, the Justice Department announced it would appeal the district court’s ruling overturning the prior policy. The Justice Department claims the appeal is necessary to defend the integrity of the FDA’s drug approval process, and the agency’s ability to base its decisions on expert “scientific judgments.” Yet as Ronald Bailey notes, the whole reason the Administration’s Plan-B rules ended up in court in the first place was that political officials overruled the FDA’s expert judgment. Further, as I noted here, drug approval decisions necessarily involve policy considerations, and cannot be resolved by science alone.
Archive for the ‘Health Care’ Category
Last week, several small business owners and individuals filed suit challenging the legality of an IRS rule purporting to authorize tax credits for the purchase of qualifying health insurance policies in federal exchanges. The complaint is here. The suit is being coordinated by the Competitive Enterprise Institute and the plaintiffs are represented by Michael Carvin of Jones Day. Here’s coverage of the suit from BLT and the WSJ.
This suit presses the argument I have made with Michael Cannon in this recently published article in Health Matrix. It raises similar claims to another suit pending in federal district court in Oklahoma. For more on the issue, see these posts.
The Health Care Case: The Supreme Court’s Decision and its Implications - A new book on last year’s controversial Supreme Court decision on Obamacare is now available for pre-order at Amazon. The book is edited by Columbia law professors Nathaniel Persily, Gillian Metzger, and Trevor Morrison, and published by Oxford University Press. It contains essays on numerous aspects of the health care decision by a wide range of scholars, including VC-ers Jonathan Adler, Randy Barnett, and myself. There is also a large number of contributions by leading scholars on the other side of the issue, including Jack Balkin, Jamal Greene, Andrew Koppelman, Gillian Metzger, and Neil Siegel, among others. The Oxford University Press website has a complete table of contents here.
My own contribution to the volume addresses the Court’s analysis of the Necessary and Proper Clause, and explains why the individual health insurance mandate was not “proper” even if it could be considered “necessary.” An earlier version of that essay is available on SSRN here.
A recent Kaiser Family Foundation poll (Kaiser is one of the leading pollsters focusing on health care issues) finds that 42% of Americans are unaware that the Affordable Care Act is still the law of the land. Kaiser reports that that figures includes “12 percent who believe the law has been repealed by Congress, 7 percent who believe it has been overturned by the Supreme Court and 23 percent who say they don’t know enough to say what the status of the law is.” And as both Kaiser studies and other polls reveal, it is likely that many of the remaining 58% do not actually know very much about what is included in the law. If only the Kaiser poll had been published a little earlier, I would have included it in my forthcoming book Democracy and Political Ignorance: Why Smaller Government is Smarter (forthcoming this fall from Stanford University Press).
This kind of widespread ignorance is striking in light of the fact that the ACA has been widely debated for over three years, and information about is readily available from a wide range of sources, online and elsewhere. Some will find the result shocking. But it will not surprise long-time VC readers who know about the problem of rational political ignorance. Much of the public often ignores readily available information about politics and public policy because they find the subject uninteresting and there is little incentive to learn about it just for the purpose of becoming a better-informed voter. For that reason, even people who are by no means stupid can and often do rationally choose to remain ignorant about a variety of political issues. Those who do become relatively well-informed about politics often evaluate political information in a highly biased way, which is also rational, given that truth-seeking may not have been their main objective in following politics. Unfortunately, individually rational behavior often leads to bad collective results when voters take their ignorance and bias to the polls.
This morning, a federal district court judge overturned the Department of Health and Human Services’ decision to maintain limits on access to Plan B contraception by girls under the age of 17. As I noted here, the Food and Drug Administration had initially decided to grant a petition urging a removal of the age restrictions but was overruled by HHS Secretary Kathleen Sebelius. Today’s decision overrules the Secretary’s decision on the grounds that it was “arbitrary, capricious, and unreasonable,” and the judge accuses HHS of “bad faith” and “intolerable” delays in considering the initial petition that prompted this litigation. The opinion is here and a related order is here. The opinion’s conclusion summarizes the case as follows:
The decisions of the Secretary with respect to Plan B One-Step and that of the FDA with respect to the Citizen Petition, which it had no choice but to deny, were arbitrary, capricious, and unreasonable. I decline to direct a remedy comparable to that which I directed in my 2009 opinion, such as directing that emergency contraception be made available without a prescription but with the current point-of-sale restrictions to women whom studies have demonstrated are capable of understanding the label and using the product appropriately. As I have previously observed, the obstructions in the path of those adolescents in obtaining levonorgestrel-based emergency contraceptives under the current behind-the-counter regime have the practical effect of making the contraceptives unavailable without a doctor’s prescription. Consequently, the decision of the FDA denying the Citizen Petition is reversed, and the case is remanded to the FDA with the instruction to grant the Citizen Petition and make levonorgestrel-based emergency contraceptives available without a prescription and without point-of-sale or age restrictions within thirty days. On remand, the FDA may determine whether any new labeling is reasonably necessary. Moreover, if the FDA actually believes there is any significant difference between the one- and two-pill products, it may limit its over-the-counter approval to the one-pill product.
The question now is when, if ever, will the FDA make all contraception available over-the-counter?
UPDATE: More from Wonkbook here.
The Liberty Law Blog recently posted my review of Harvard Law Professor Einer Elhauge’s book Obamacare on Trial, which was possibly the first academic book on the Obamacare litigation published by a legal scholar since the Supreme Court issued its decision in NFIB v. Sebelius. Elhauge is a topnotch scholar, and his book makes some interesting points in defense of the constitutionality of the individual health insurance mandate. But it’s not as strong as it could have been had he been able to address some key issues in greater depth:
Harvard Law Professor Einer Elhauge’s book Obamacare on Trial is a useful and sometimes insightful statement of several arguments in defense of the mandate. It is impressive that Elhauge managed to get the book in print just a couple months after the Court’s decision came down on June 28, 2012. But, perhaps because of the haste with which it was published, the book fails to adequately address some key issues, and likely will not be persuasive to those not already inclined to agree with Elhauge’s conclusions....
Elhauge’s most distinctive contribution to the debate over the mandate was his repeated invocation of two 1790s laws that, he argues, provide precedents for upholding the individual mandate as an exercise of the commerce power: The 1792 Milita Act, which required militia members to possess muskets and other military equipment; and the 1798 Act for the Relief of Disabled and Sick Seamen, which required owners of American ships arriving from foreign ports to a withhold a part of their seamen’s wages and pay the money into a government-administered fund for the “temporary relief of sick and disabled seamen....”
This is an interesting thesis and Elhauge defends it well. But, ultimately, it flounders on the many clear differences between the two 1790s acts and the health insurance mandate....
Although Obamacare on Trial is a thoughtful defense of Elhauge’s distinctive take on the mandate litigation, it gives short shrift to several other important aspects of the case. For example, Elhauge argues that the mandate is authorized by the Necessary and Proper Clause as well as the Commerce Clause. But he fails to consider the point that a mandate authorized by that Clause must be “proper” as well as “necessary” for “carrying into Execution” other powers granted to the federal government in the Constitution. That is the key reason why the Necessary and Proper Clause rationale was rejected by a majority of the Court...
Elhauge also devotes little attention to the Tax Clause reasoning under which Chief Justice Roberts ultimately upheld the mandate. And he devotes almost none at all to the many arguments against that conclusion, including those endorsed by every lower court that considered the issue....
Overall, Obamacare on Trial is a thought-provoking contribution to the debate over the individual mandate case. But its limitations prevent it from becoming the definitive work on the subject, or even the definitive defense of the case for the mandate’s constitutionality.
In his recent response to Randy Barnett, co-blogger Orin Kerr argues that previous precedent, especially the Supreme Court’s 2010 decision in United States v. Comstock justifiably led many observers to expect that the Court would readily uphold the individual health insurance mandate, and that its failure to do so under the Commerce and Necessary and Proper Clauses was a major change from Comstock and other prior precedents.
I agree that Comstock was a very broad interpretation of federal power in some respects, and I believe it was wrongly decided. Yet, even at the time Comstock was decided, it was easy to find crucial differences between that case and the individual mandate case. In a post written on the day that Comstock came down and in an article about Comstock published in the fall of 2010, I pointed out two such distinctions. First, Comstock endorsed a broad interpretation of the meaning of “necessary” in the Necessary and Proper Clause, but said nothing about the meaning of “proper.” The challenge to the mandate was primarily based on the idea that it was “improper” rather than unnecessary. Second, in upholding the law at issue in Comstock, the Court relied in part on a five-factor test that, when applied to the mandate mostly cut against the federal government. In my article (pg. 266), I also noted the possibility that the inclusion of the five factor test in the opinion may have been the price that Chief Justice John Roberts forced the four liberal justices to pay for casting the decisive fifth vote in favor of the majority opinion (Justices Alito and Kennedy concurred in separate opinions that outlined much narrower visions of the scope of federal power).
These distinctions were, in fact, exactly the ones relied on by Chief Justice Roberts in his key swing vote opinion in the individual mandate case. He concluded that the individual mandated was not “proper,” even if it was “necessary,” and also cited key differences between the law in Comstock and the individual mandate under the five factor test, such as that the mandate was not “narrow in scope” (though Roberts did not go through all five factors individually).
Orin and other observers who expected the mandate case to be a lopsided victory for the federal government also missed the significance of Justice Kennedy’s opinion for a unanimous Court in the 2011 case of Bond v. United States, where he emphasized that constitutional “[f]ederalism secures the freedom of the individual” as well as the prerogatives of state governments. As I pointed out in two posts written well before the mandate oral argument (see here and here), this signaled that the Court’s key swing voter was unlikely to uphold the mandate if it meant giving Congress a virtual blank check to enact any other mandates it wanted. And inability to specify a meaningful limit to the scope of its power was always the key flaw in the federal government’s position.
I don’t mean to suggest that, after Comstock and Bond, it was clear that a majority of the Court would reject the federal government’s Commerce and Necessary and Proper arguments, or even that it was unreasonable to believe that the federal government was more likely to win on these points than the plaintiffs. I also don’t mean to suggest that I myself was an especially good prognosticator during the individual mandate litigation. Although I was right about the implications of Comstock and Bond, and also right (from early on) to expect a close decision, I got some other important points wrong, especially in dismissing the possibility that the mandate might be upheld as a tax. But I do think Comstock and especially Bond should have alerted observers to the likelihood that the individual mandate litigation would not be an easy win for the federal government. In combination with other factors, they certainly had that effect on me.
UPDATE: Randy Barnett had some prescient thoughts about the interaction between Comstock and the individual mandate case in this post written the day Comstock was decided.
UPDATE: #2: I should note that, until the oral argument, I consistently predicted that it was more likely that the mandate would be upheld than struck down, and afterwards, I said it was a 50-50 proposition. So I don’t blame anyone merely for believing that the the mandate was going to be upheld under the Commerce or Necessary and Proper Clauses. My critique is directed at those who claimed that the case would be an easy win for the federal government and that any other result would be a major break with precedent, in some cases long after there were plenty of indications suggesting otherwise.
When Congress passed the PPACA, the Congressional Budget Office projected the law would result in an additional 32 million people getting health coverage within a decade. In 2011, CBO was even more optimistic, predicting the law would lead to coverage for 34 million people. Now, as Bloomberg reports, the CBO has changed its tune. According to the CBO’s latest estimates, the PPACA will lead to only 27 million people gaining coverage. One factor is the refusal of some governors to participate in the Medicaid expansion. Another is that millions of Americans are expected to lose their employer-based coverage, a point the WSJ emphasizes in this story.
The CBO has long said it expects the new federal health law will prompt some companies to drop millions of employees from health plans because workers have new options to buy insurance on their own. In August, CBO put the number at four million over 10 years. Now it’s seven million.
The fiscal cliff deal is part of the cause, as higher tax rates would have provided a greater incentive for employers to offer employer-based coverage in lieu of taxable wages. So could rapidly increasing health insurance premiums. As Politico reported, some populations could see premiums triple.
Meanwhile, according to this report, Minnesota Governor Mark Dayton (D) is apparently concerned that “ObamaCare” could swallow “MinnesotaCare,” resulting in higher insurance premiums for poor families. Minnesota has sought a waiver, but there’s no word on how HHS will respond.
The point of the individual mandate was to counteract the adverse selection problem caused by community rating and the requirement that insurance companies issue insurance policies without regard for preexisting conditions. The mandate — or, as we now know it, the tax on being uninsured — provides an incentive for younger, healthier (and less costly to insure) to obtain health insurance. The problem, as I’ve noted before, is the size of the penalty is way too small to achieve its desired effect. While the penalty will have some effect on the margin, it will not have a dramatic effect because, for many individuals, the penalty is less than the cost of obtaining a qualifying insurance policy (a gap that only grows as many PPACA provisions take effect and premiums rise).
What to do? The easiest thing to do would be to increase the size of the penalty. Yet in upholding the penalty as a tax, Chief Justice Roberts also tied Congress’s hands. While there may be room to increase the penalty somewhat, Congress can’t increase the cost it too much, lest it no longer qualify as a “tax.” Should the penalty exceed the cost of a qualifying health insurance plan, it would lose some of the characteristics that enabled Roberts to deem it a tax.
Insurance companies would love a larger tax penalty, but getting something like that through Congress could be quite difficult. So they’ve turned to the Administration. As Politico reports, insurance companies are urging the Department of Health and Human Services to adopt other measures to penalize those who fail to obtain health insurance and encourage broader enrollment.
The individual mandate penalties will be pretty weak as they are phased in over two years — only $95 when they start in 2014, much less than it costs to buy insurance. And yet, everyone with pre-existing conditions will have to be accepted for coverage right away.
That’s why insurance companies are telling the administration the mandate won’t be enough for the first two years. They want more incentives — such as a late enrollment fee — to get healthy people to sign up quickly. Without getting the healthy folks in, the fear is that everyone’s health insurance premiums could shoot through the roof when all those sick people get their coverage.
The idea is being called “mandate plus” — because some of the ideas were floated by health experts last year as replacements, in case the Supreme Court struck the mandate down. Now that the mandate is here to stay, insurance companies and some policy experts say the other ideas should go hand in hand with the coverage requirement to make the whole system work — and be affordable.
It’s been a significant week for litigation over the contraception mandate. On December 20, a motions panel of the U.S. Court of Appeals for the Tenth Circuit denied employer Hobby Lobby’s motion for an injunction pending appeal. As a private employer, Hobby Lobby is not eligible for the safe harbor from enforcement, and will be subject to the mandate at the start of the new year. As a consequence, Hobby Lobby filed an emergency application for a stay with the Supreme Court, which Justice Sonia Sotomayor denied with a brief four-page opinion. According to Justice Sotomayor, Hobby Lobby could not meet the extraordinarily demanding standard for such an injunction. Lyle Denniston has a brief report on SCOTUSBlog, and Ed Whelan critiques the decision on Bench Memos (see also here). for what it’s worth, I am not as convinced as Whelan that Hobby Lobby’s rights under the Religious Freedom Restoration Act are “indisputably clear.” While I think religious institutions have a strong RFRA-based free exercise claim, and that religious institutions — and not the government — define the contours of what the exercise of a given religious faith requires — I am not sure that private, for-profit corporations can avail themselves of RFRA in the same way as avowedly religious institutions., even when privately held by religiously devout individuals, nor am I aware of any case law that would clearly establish this point (but see below).
Meanwhile, the U.S. Court of Appeals for the Seventh Circuit is looking more favorably on another private employer’s challenge to the contraception mandate. In what Lyle Denniston calls “the most significant federal appeals court ruling so far on the new federal health care law’s contraceptives mandate,” a divided panel of the Seventh Circuit granted a private employer’s emergency motion for an injunction against enforcement of the contraception mandate. Judges Flaum and Sykes voted in favor of the employer’s claim; Judge Rovner against. Here are some key excerpts:
The Kortes are Roman Catholic, and they seek to manage their company in a manner consistent with their Catholic faith, including its teachings regarding the sanctity of human life, abortion, contraception, and sterilization. In August 2012 they discovered that the company’s current health‐insurance plan includes coverage for contraception. The plan renewal date is January 1, 2013. The Kortes want to terminate this coverage and substitute a health plan (or a plan of self‐insurance) that conforms to the requirements of their faith. The ACA’s preventive‐care provision and implementing regulations prohibit them from doing so. . . .
The Kortes contend that the contraception mandate substantially burdens their exercise of religion by requiring them, on pain of substantial financial penalties, to provide and pay for an employee health plan that includes no‐cost‐sharing coverage for contraception, sterilization, and related medical services that their Catholic religion teaches are gravely immoral. They further contend that the mandate fails RFRA’s strict‐scrutiny requirement because the government’s interest in making contraception and sterilization accessible on a cost‐free basis is not sufficiently strong to qualify as compelling, and that coercing religious objectors to provide this coverage is not the least restrictive means of achieving that objective. They point out that some health plans are either grandfathered or exempt from the mandate, illustrating that the interest served by the mandate is far from compelling. And they argue that the government has other methods of furthering its interest in free access to contraception without imposing this burden on their religious liberty—for example, by offering tax deductions or credits for the purchase of contraception or incentives to pharmaceutical companies or medical providers to offer the services.
In response, the government’s primary argument is that because K & L Contractors is a secular, for‐profit enterprise, no rights under RFRA are implicated at all. This ignores that Cyril and Jane Korte are also plaintiffs. Together they own nearly 88% of K & L Contractors. It is a family‐run business, and they manage the company in accordance with their religious beliefs. This includes the health plan that the company sponsors and funds for the benefit of its nonunion workforce. That the Kortes operate their business in the corporate form is not dispositive of their claim. See generally Citizens United v. Fed. Election Comm’n, 130 S. Ct. 876 (2010). The contraception mandate applies to K & L Contractors as an employer of more than 50 employees, and the Kortes would have to violate their religious beliefs to operate their company in compliance with it.
The government also argues that any burden on religious exercise is minimal and attenuated, relying on a recent decision by the Tenth Circuit in Hobby Lobby Stores, Inc. v. Sebelius, No. 12‐6294 (10th Cir. Dec. 20, 2012). Hobby Lobby, like this case, involves a claim for injunctive and declaratory relief against the mandate brought by a secular, for‐profit employer. On an interlocutory appeal from the district court’s denial of a preliminary injunction, the Tenth Circuit denied an injunction pending appeal, noting that “the particular burden of which plaintiffs complain is that funds, which plaintiffs will contribute to a group health plan, might, after a series of independent decisions by health care providers and patients covered by [the corporate] plan, subsidize someone else’s participation in an activity condemned by plaintiff[s’] religion.” Id. at 7 (quoting Hobby Lobby Stores, Inc. v. Sebelius, 870 F. Supp. 2d 1278, 1294 (W.D. Okla. 2012)). With respect, we think this misunderstands the substance of the claim. The religious‐liberty violation at issue here inheres in the coerced coverage of contraception, abortifacients, sterilization, and related services, not—or perhaps more precisely, not only—in the later purchase or use of contraception or related services.
And from Judge Rovner’s dissent:
Although the Kortes contend that complying with the Patient Protection and Affordable Care Act’s insurance mandate violates their religious liberties, they are removed by multiple steps from the contraceptive services to which they object. First, it is the corporation rather than the Kortes individually which will pay for the insurance coverage. The corporate form may not be dispositive of the claims raised in this litigation, but neither is it meaningless: it does separate the Kortes, in some real measure, from the actions of their company. Second, the firm itself will not be paying directly for contraceptive services. Instead, their company will be required to purchase insurance which covers a wide range of health care services. It will be up to an employee and her physician whether she will avail herself of contraception, and if she does, it will be the insurer, rather than the Kortes, which will be funding those services. In the usual course of events, an employer is not involved in the delivery of medical care to its employee or even aware (by virtue of physician‐patient privilege and statutory privacy protections) of what medical choices the employee is making in consultation with her physician; only the employee, her physician, and the insurer have knowledge of what services are being provided. What the Kortes wish to do is to preemptively declare that their company need not pay for insurance which covers particular types of medical care to which they object, despite the fact that neither the company nor its owners are involved with the decision to use particular services, nor do they write the checks to pay the providers for those services. . . . If an employer has this right, it is not clear to me that limits there might be on the ability to limit the insurance coverage the employer provides to its employees, for any number of medical services (or decisions to use particular medical services in particular circumstances) might be inconsistent with an employer’s (or its individual owners’) individual religious beliefs. In short, the Kortes have not shown that complying with the insurance mandate substantially burdens the free exercise of their religious rights, in violation of the Religious Freedom Restoration Act.
As noted above, I think the Seventh Circuit’s approach is clearly correct as applied to religious institutions — universities, hospitals, and the like — as the creation and operation of such institutions is often part of the religious calling of those of particular faiths. Imposing a requirement to cover contraception (including abortifacients and sterilization procedures) is almost certainly a substantial burden on the free exercise of religion by such institutions under RFRA. I am less confident, however, that this argument can (or should) be extended to private, for-profit corporations. Although the owners of such companies have free exercise rights under RFRA, it’s not clear that the imposition of regulations governing the operation of the corporation constitutes a “substantial burden” as the creation and operation of the business is not part of their religious calling. To prevent the Catholic church from operating hospitals, schools and charities is to inhibit the church’s ability to fulfill its religious calling. But to prohibit or constrain a Catholic individual from operating a business with over 50 employees does not inhibit free exercise in the same way. I agree with the Seventh Circuit that the use of the corporate form is not dispositive, but I would place more weight on the nature of the “corporation” involved. To be continued.
Yesterday, Lyle Denniston at SCOTUSBlog reports, the U.S. Court of Appeals for the D.C. Circuit effectively overturned a district court’s dismissal of a challenge to the so-called “contraception mandate,” a regulation issued by the Department of Health and Human Services that employer-provided health care plans include coverage for all FDA-approved forms of contraception without cost-sharing. Various religious employers have objected to this requirement citing the First Amendment’s free-exercise clause and (more persuasively) the Religious Freedom Restoration Act (RFRA).
The D.C. case was filed by Wheaton College and Belmont Abbey College. The district court had dismissed the case for lack of standing and ripeness. In its brief order, the D.C. Circuit explained that the district court was wrong to dismiss the suit against the mandate for lack of standing as “the colleges clearly had standing when these suits were filed.” The ripeness question “is more difficult,” the court explained, because HHS has promised to address religious employers’ claims in a new rulemaking. Taking HHS at its word, the D.C. Circuit concluded the lawsuits should be held in abeyance, pending further action by HHS. As it explained:
In the Federal Register notice announcing their February 2012 Final Rule, the appellees left the religious employer exemption unchanged but created a safe harbor from enforcement of the contraceptive coverage requirement for entities like the appellants, which remains in effect until the first plan year that begins on or after August 1, 2013. 77 Fed. Reg. at 8728. (The plan years of both appellants begin January 2014.) The notice also announced the appellees’ intention to “develop and propose changes to these final regulations that would meet two goals” — providing contraceptive coverage without cost-sharing to covered individuals and accommodating the religious objections of non-profit organizations like appellants. Id. at 8727. Thereafter, on March 21, 2012, the appellees issued an Advance Notice of Proposed Rulemaking (ANPRM), which states: “The Departments intend to propose that, when offering insured coverage to a religious organization that self-certifies as qualifying for the accommodation, a health insurer may not include contraceptive coverage in that organization’s insured coverage. This means that contraceptive coverage would not be included in the plan document, contract, or premium charged to the religious organization.” 77 Fed. Reg. 16,501, 16,505 (Mar. 21, 2012). (The ANPRM went on to state: “Instead, the issuer would be required to provide participants and beneficiaries covered under the plan separate coverage for contraceptive services . . . without cost sharing . . . .” Id.)
At oral argument, the government went further. First, it represented to the court that it would never enforce 45 C.F.R. § 147.130(a)(1)(iv) in its current form against the appellants or those similarly situated as regards contraceptive services. Oral Arg. Recording at 36:25 – 36:33. There will, the government said, be a different rule for entities like the appellants, Oral Arg. Recording at 37:25 – 38:46, and we take that as a binding commitment. The government further represented that it would publish a Notice of Proposed Rulemaking for the new rule in the first quarter of 2013 and would issue a new Final Rule before August 2013. Oral Arg. Recording at 35:39 – 36:02.
We take the government at its word and will hold it to it. Based expressly upon the understanding that the government will not deviate from its considered representations to this court, we conclude that the cases are not fit for review at this time because “[i]f we do not decide [the merits of appellants’ challenge to the current rule] now, we may never need to.”
As a consequence of this ruling HHS will have little choice but to issue a rule relieving many religious employers of the obligation to provide coverage for contraception. The interesting question will be how this is to be accomplished under existing statutory authority. Moreover, the Administration’s proposed fix — allowing religious employers to exclude contraception coverage but requiring insurers to provide separate contraception coverage to employees at no charge — would do nothing to alleviate the burden on those religious employers that self-insure (which many do because, among other reasons, it provides a way to escape state-level contraception mandates).
Meanwhile, on November 28, the U.S. Court of Appeals for the Eighth Circuit stayed a district court decision dismissing a suit against the mandate filed by a private employer professing religious objections. (Judge Arnold dissented from the order without opinion.) Further, as Stuart Taylor notes in this overview of the litigation for Kaiser Health News, three other district courts have issued preliminary injunctions against the mandate in separate cases, and literally dozens more cases are pending. So as predicted, the contraception mandate appears to be having trouble in federal court.
[Note: In the original post, I mis-identified one of the plaintiffs in this case as the Catholic University of America. CUA is challenging the mandate, but in a different case. I've corrected the error.]
Yesterday the U.S. Court of Appeals for the D.C. Circuit heard oral argument in one of the cases challenging the lawfulness of the federal requirement that employer-provided health care plans include contraception coverage. As the court was aware the current regulations may yet be revised, as the Administration has promised to find a way to accommodate objections from religious employers more than it has to date –even if it has no idea how to do this.
One way to reduce the political conflict over contraception would be to allow the sale of oral contraceptives over-the-counter. This approach has been endorsed by the American College of Obstetricians and Gynecologists, and in yesterday’s WSJ by Louisiana Governor Bobby Jindal, a staunch conservative often mentioned as a possible presidential candidate in 2016.
As an unapologetic pro-life Republican, I also believe that every adult (18 years old and over) who wants contraception should be able to purchase it. But anyone who has a religious objection to contraception should not be forced by government health-care edicts to purchase it for others. And parents who believe, as I do, that their teenage children shouldn’t be involved with sex at all do not deserve ridicule.
Let’s ask the question: Why do women have to go see a doctor before they buy birth control? There are two answers. First, because big government says they should, even though requiring a doctor visit to get a drug that research shows is safe helps drive up health-care costs. Second, because big pharmaceutical companies benefit from it. They know that prices would be driven down if the companies had to compete in the marketplace once their contraceptives were sold over the counter.
So at present we have an odd situation. Thanks to President Obama and the pro-choice lobby, women can buy the morning-after pill over the counter without a prescription, but women cannot buy oral contraceptives over the counter unless they have a prescription. Contraception is a personal matter—the government shouldn’t be in the business of banning it or requiring a woman’s employer to keep tabs on her use of it. If an insurance company or those purchasing insurance want to cover birth control, they should be free to do so. If a consumer wants to buy birth control on her own, she should be free to do so.
Jindal also notes that the cost of contraception to consumers would be lower were it not for provisions in the PPACA that prevent consumers from using health care savings account funds to pay for non-prescription medications.
If a staunchly conservative, pro-life Catholic politician can endorse over-the-counter sale of oral contraception, who besides those drug companies profiting from the status quo will object?
UPDATE: Okay, I’ll answer my own question: There may be some objections from those who are focused on making insurance pay for contraception. What I think many people with that perspective tend to ignore is that the cost of oral contraception is not simply the out-of-pocket cost of the pills themselves, but also the cost of getting a prescription, which for many working poor can be significant (due to the need to take time of work, etc.).
Yesterday was the deadline for states to tell the Department of Health and Human Services whether they wanted create their own health insurance exchanges. As the NYT reports, only 17 states have said they intend to create an exchange. Among the reasons states have given for refusing to cooperate is the lack of guidance from HHS and the reality that state exchanges will still have to play the federal government’s tune.
Pennsylvania seriously considered running its own exchange, but Gov. Tom Corbett said on Wednesday that he would not pursue the idea.
“State authority to run a health insurance exchange is illusory,” Mr. Corbett said. “In reality, Pennsylvania would end up shouldering all of the costs by 2015, but have no authority to govern the program.”
In Tennessee, state officials did a huge amount of planning for a state-run exchange. But Gov. Bill Haslam announced this week that he had decided against the idea because the Obama administration had failed to answer numerous operational questions.
Gov. Chris Christie of New Jersey cited similar concerns in vetoing legislation to establish a state-based exchange last week.
“New guidance continues to trickle out of Washington at an erratic pace,” Mr. Christie said.
The federal government faces a daunting challenge in trying to create exchanges in 30 or more states. Among the other problems, the PPACA did not provide HHS with any money to pay for the creation or operation of federal exchanges. Last year, HHS conceded this would require getting “creative.” One step HHS intends to take is imposing a 3.5 percent surcharge on the sale of insurance plans in federally run exchanges, but this still won’t be enough.
One oft-repeated response in the comments to my latest post reiterating the argument that the PPACA only provides tax credits for the purchase of qualifying health insurance in state-run exchanges is that this would produce an “absurd” results. This would be “absurd,” some claim, because the consequence of state refusal to create their own exchanges — the loss of tax credits and subsidies for the purchase of insurance — would undermine the goals of the Act. Further, some argue, it would be absurd to facilitate state opposition to the Act in this way. Yet it is indisputable that this is not the first time Congress has done this. Indeed, Congress did the precise same thing in other parts of the PPACA.
The most obvious example of Congress using this “absurd” tactic is the Medicaid expansion. Under the PPACA, as written, states that refused to participate in the Medicaid expansion would forfeit federal funding for the expansion as well as all federal support for the pre-existing Medicaid program. So not only did Congress threaten to withhold new benefits in unconsenting states, it also threatened to further undermine the PPACA’s goals by withdrawing existing Medicaid funding. In other words, if a state sought to undermine the PPACA by refusing to cooperate with the Medicaid expansion, this would trigger a sanction that would reduce health care coverage for needy populations — a result directly contrary to the stated goal of the PPACA. The Supreme Court ultimately concluded this deal was unconstitutional, but there is no question of what the statute sought to do.
Congress decided to pursue the PPACA’s goal of expanding coverage by enlisting states in the cause, and it sought to enlist states in the cause by providing states with incentives, including a threat to withhold funding for benefits to needy populations. Congress did not think any state would refuse this deal, but that’s the deal Congress offered. In the case of tax credits and subsidies for health insurance purchased in exchanges, Congress likewise thought that every state would create its own exchange rather than risk the combination of a federal exchange (what some viewed as a dreaded “federal takeover” at the time) and a loss of the tax credits. Further evidence that accepting this reading would not be “absurd,” as I noted in my prior post, is that prominent PPACA supporters, such as noted health law professor Tim Jost, expressly proposed that Congress pressure states into creating exchanges “by offering tax subsidies for insurance only in states that complied with federal requirements.” Other draft health care reform bills also threatened to withhold tax credits in unconsenting states. This approach may have been foolish or unwise, but that does not make it “absurd” for purposes of statutory interpretation.
The “absurd results” doctrine provides that a statute should not be read to mean something Congress could not have meant. It is not a license to rewrite a statute because Congress made a mistake or adopted a legislative provision based on mistaken assumptions about how others might respond. At the time the PPACA was passed, everyone thought that states would fall in line. PPACA supporters thought that once the law was passed, opposition and obstruction would dissipate. They were wrong, and this does not provide the IRS (or anyone else) to rewrite the statute through administrative fiat. In writing the statute as it did, Congress may have been playing high-stakes poker, but it can’t cancel the game just because some states have decided to call Congress’s bluff.
[Note: I fixed a garbled sentence in the penultimate paragraph.]
One component of the PPACA (aka Obamacare) provides for the creation of health insurance exchanges in each state in which consumers may purchase health insurance. The PPACA’s supporters anticipated that every state would create its own exchange, and the law provides for tax credits and subsidies for the purchase of qualifying health insurance plans in state-run exchanges. Yet as Michael Cannon and I pointed out the PPACA does not authorize tax credits and subsidies in exchanges run by the federal government. This is a potential problem because at least twenty states are refusing to create their own exchanges and are defaulting to the federal option. In response, the IRS issued a rule to authorize tax credits and subsidies in federal exchanges. The only problem, as Cannon and I explain at length in a forthcoming article in Health Matrix, the IRS rule is illegal. Now the rule is being challenged in court by Oklahoma in a suit legal analyst Stuart Taylor calls “by far the broadest and potentially most damaging of the legal challenges” to PPACA implementation, and more suits are likely.
The IRS defends its rule, but has had difficulty providing much by way of justification beyond vague references to congressional intent. Now comes my friend Samuel Bagenstos, at his Disability Law blog and Balkinization, arguing that Cannon and my arguments are “nonsensical” and “deeply legally flawed.” Bagenstos is a serious scholar, and his arguments are clever, but they do not sustain the case for the IRS rule.
Bagenstos’ central argument is similar one advanced by Tim Jost on the Health Affairs blog (and to which Cannon and I responded here). Essentially he argues that the PPACA makes federal fallback exchanges the legal equivalent of state-run exchanges and therefore any tax credits or subsidies authorized in the latter must be available in the former as well. Here is the argument as Bagenstos lays it out:
Although the tax-credit provision twice uses the phrase “Exchange established by the State under section 1311,” see 26 U.S.C. § 36B(b)(2)(A), (c)(2)(A)(i), that phrase does not have the exclusionary meaning Cannon attributes to it. That is because Section 1321 (codified at 42 U.S.C. § 18041) makes clear that, when a state fails to set up an exchange, the federally-operated exchange will stand in the shoes of the state exchange for purposes of Section 1311. Thus, Section 1311 provides that “[e]ach State shall” set up an exchange by January 1, 2014. 42 U.S.C. § 18031(b)(1). Section 1321 provides that if a state “will not have any required Exchange operational” by then — that is, an exchange required by Section 1311 — then the federal government “shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State.” 42 U.S.C. § 18041(c)(1) (emphasis added). “[S]uch Exchange” in Section 1321 clearly refers to the “required exchange” — that is, the Section 1311 exchange. When the federal government operates an exchange pursuant to Section 1321, then, it is not operating some wholly foreign entity; it is operating the state exchange that Section 1311 required the state to set up but that the state failed to create. Because Section 1321 provides that a federally-operated exchange will stand in the shoes of a state-operated exchange created by Section 1311, there is no basis for denying participants in federally-operated exchanges the same tax credits obtained by participants in state-operated exchanges.
So, according to Bagenstos, when Section 1321 directs the federal government to create “such Exchange,” it is authorizing the federal Section 1321 exchange to operate as a Section 1311 exchange. As I said, it’s a clever argument, but it’s incomplete. Just because a federal exchange created under Section 1321 is subject to all the same requirements as a state exchange created under Section 1311 does not mean that tax credits available in a state exchange much be available in a federal exchange as well, particularly when the plain text of the statute provides otherwise.
First, Section 1311 expressly requires that an authorized Exchange must be “established by a State.” Section 1304(d) also expressly defines “state” as “each of the 50 States and the District of Columbia.” Later amendments to the PPACA also provide that Exchanges created by territories are to be treated as the equivalent of state-run Exchanges, but there is no such language concerning federally run Exchanges. But let’s set this aside and concede, for the sake of argument, that a Section 1321 Exchange is the equivalent (or “stands in the shoes”) of a Section 1311 Exchange. This is still not enough to sustain Bagenstos’s claim.
The eligibility requirements for the tax credits are laid out in Section 1401. This section repeatedly defines qualifying health insurance plans eligible for tax credits as those purchased “through an Exchange established by the State under section 1311.” We can read Section 1311 to incorporate Section 1321 as Bagenstos urges, but a federal Exchange is still not an Exchange “established by the State.” Bagenstos claims he has provided “the most plausible reading of the statutory text,” but to accept Bagenstos’s argument is to render this repeated language both redundant and surplusage. The “most plausible” reading of any statute is not one that requires the reader to ignore relevant statutory text or deprive it of any meaning, yet that is precisely what Bagenstos does.
Bagenstos goes on to argue that “nor is there any reason” why Congress would have conditioned the availability of tax credits on state cooperation. But of course there is. The authors of the Senate bill wanted states to create exchanges. The statute even purports to require states to do it. But Congress cannot tell states what to do. Thus it needed to provide them with an incentive to play along, and committing to create a federal exchange as a fallback is not much of a threat. So the Senate bill provides modest financial support for state creation of exchanges (but no money for oerating expenses) and threatens to withhold benefits – the tax credits and subsidies — in states that don’t comply. Where did the Senate get this idea? One possibility is our friend Tim Jost, who wrote in 2009 that Congress could try to induce states to create exchanges by, among other things, “by offering tax subsidies for insurance only in states that complied with federal requirements.” While less common than threatening to withhold funds (as was done with Medicaid) this approach is not unprecedented, and several of the pre-enactment Senate health care reform bills contained similar provisions explicitly designed to encourage state cooperation.
Bagenstos thinks the threat of withholding tax credits was unnecessary because the PPACA provides for a federal fallback exchange for noncompliant states, and this was enough to give the states a meaningful choice. But the PPACA’s authors did not want states to have such a choice, as indicated by the language of the bill, repeated statements that all states would (or would be required to) create their own exchanges, and the lack of any money in the bill to pay for creating federal fallback exchanges. The requirement that HHS create federal fallback exchanges in noncompliant states is hardly much inducement for state cooperation – and everyone knows it. Even when Congress puts a big pot of money on the table, as it did with the Medicaid expansion, states are reluctant to play along at their own expense. Conditional preemption is common in cooperative federalism statutes, but it is rarely sufficient to get states to toe the line. That’s why Congress sought to condition other funds on state participation on Medicaid’s expansion and why it would have been hopelessly naïve to believe that every state would create an Exchange – as PPACA advocates repeatedly claimed – without something else on the table. That something else is the availability of tax credits. The PPACA’s authors’ mistake was not in how they drafted the statute, but in believing they had done enough to get every state to create an exchange.
Bagenstos also takes issue with our reference to a colloquy in the Senate Finance Committee as further evidence that the Senate bill’s authors knew what they were doing. At a hearing, Senate Finance Chairman Max Baucus was asked to explain how the committee had jurisdiction to impose requirements on state-run health care exchanges. The answer, according to Sen. Baucus, was that the Committee could impose “conditions” on the receipt of tax credits. Precisely. Bagenstos argues “there is nothing the Finance Committee’s jurisdiction that required it to limit tax subsidies to participants in state-operated exchanges.” That’s true, but beside the point. If the Senate Finance Committee wanted to tell states how their exchanges were to be run, it needed a hook. That’s the role the conditional tax credits play. The Committee could write requirements for state-run exchanges because these requirements were “conditions” for receipt of tax credits.
In sum, the text of the PPACA is clear, as even some of our opponents have acknowledged. The alternative interpretation Bagenstos offers requires disregarding portions of the text and ignoring the statute’s history. Neither Bagenstos nor anyone else has been able to identify any statutory language or contemporaneous evidence from the legislative history that is inconsistent with Cannon and my account. There are lots of statements that tax credits would be available in every state, but even more comments that every state would create its own exchange, and the latter explains the former. The CBO scored the bill as if tax credits would be available in every state, but has admitted that it conducted no legal analysis of the Senate bill. Congress expected states would willingly create exchanges if given mild inducement, and the Senate bill was written accordingly. This was in error, but it does not justify rewriting the statute.
A final point: Bagenstos characterizes our paper as a “rearguard challenge to Obamacare,” implying the arguments were manufactured after the fact to “unravel” the Supreme Court’s NFIB decision. The suggestion is that these are arguments of convenience. Not so. Cannon and I raised these issues well before NFIB was argued, let alone decided. I first noted how the text of the PPACA limits tax credits to state-run exchanges in a talk at a health care reform conference in February 2011 (subsequently published that spring in the Kansas Journal of Law & Public Policy), without realizing how this language could affect PPACA implementation. Cannon and I also first collaborated on this issue in November 2011, before the IRS rule was finalized and before many thought judicial invalidation of the individual mandate (let alone the PPACA as a whole) was even a remote possibility. There are also larger issues at stake. Federal agencies only have that authority they have been delegated by Congress and are not authorized to rewrite statutes in response to changing political conditions. Therefore, just as I criticized the Bush EPA for taking liberties with the Clean Air Act, I am now criticizing the Obama IRS and HHS Administration for taking liberties with the PPACA.
For those who want more, Michael Cannon also responded to Bagenstos at the Cato@Liberty blog, prompting a rejoinder from Bagenstos here. For those who want more, Bagenstos and I will have the chance to debate this issue tomorrow during a Federalist Society teleforum. (Podcast to follow.) Cannon and I will also be posting a revised and updated draft of our paper on SSRN shortly.