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Democrats can jam Obamacare down people's throats, but can't force them to keep it down

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Opinion,Columnists,Shikha Dalmia,Obamacare,Healthcare.gov,Law,Health Care Exchanges

If 2013 has been unkind to Obamacare, 2014 might be downright brutal: The troubled website is still a mess; the administration has been forced to suspend its centerpiece, the individual mandate, for folks facing cancelled policies; and the employer mandate has been delayed.

But all of this might pale in comparison with the mountain of legal troubles about to greet the program: The Supreme Court agreed this month to rule on the constitutionality of the mandate requiring employers to provide contraceptive coverage against their religious beliefs.

And soon it might have to entertain yet another legal challenge: Whether the subsidies the IRS wants to hand out through the 34 federal exchanges are legal. The plaintiffs in the lawsuit, including Oklahoma's attorney general, various businesses, and 15 Indiana school districts claim they are not, because the statute explicitly limits these subsidies to state, not federal, exchanges.

Supporters are pooh-poohing this claim as “nonsensical.” But four federal courts have already in a sense overruled them by refusing to throw out legal challenges based on this argument. In fact, two of them — King v. Sebelius and Halbig v. Sebelius — held summary hearings earlier this month, even though the judge in Halbig is a Clinton appointee.

So, what's the big deal?

Everyone agrees that Obamacare gives the feds the authority to create exchanges in states that refuse to do so. The disagreement is over whether it also allows Uncle Sam to hand out subsidies through such exchanges.

Obamacare supporters claim that the law could not possibly have barred them. Why? Because without them only the sick would cough up the tens of thousands in premiums that exchange plans cost, unleashing an adverse selection death spiral. Congress couldn't have deliberately set up its own law for failure, they argue.

What they disregard is that Congress had no choice because, authorizing such subsidies would have created even worse problems.

One: They would have removed from the states a key incentive to create exchanges, forcing Uncle Sam to take on this herculean task (for which it obviously has zero talent as the disastrous launch of healthcare.gov demonstrates).

Two: Uncle Sam can’t constitutionally “commandeer” states. But that is exactly what it would be doing by extending subsidies through its exchanges. Why?

Because a state’s employers and residents become subject to the law’s mandates and penalties only when subsidies become available within its borders. So long as only state exchanges are authorized to hand out subsidies, states can shield its people simply by refusing to implement an exchange. But if the feds can extend subsidies, this shield disappears. In essence, the state becomes subject to the diktats of a law it has officially rejected.

Forcing states like this would never have passed muster in Congress given the fragile support for the law at the time. So the administration’s choice was to pass the law without such subsidies or kill it by including them. Letting the IRS extend subsidies would mean letting unelected bureaucrats “commandeer” states, something Congress was unwilling to do.

Some courts might be willing to allow this, but it’s unlikely all will. More likely, they’ll split and the matter will reach the Supreme Court. This will take months, possibly years, to play out.

But Obamacare cannot afford prolonged uncertainty. Even after the improvements in the website, the administration is far short of its goal of signing up 500,000 people by November's end. Worse, the website is still sending insurers faulty sign-up data, making it very hard for them to know who their customers are.

Insurers are extremely nervous that mostly the old and sick are signing up -- and the young and healthy are sitting it out. This will skew their risk pool and saddle them with massive losses. Now, Halbig and its sister lawsuits are raising the specter that, should the federal subsidies be struck down, they might not even get fully paid for the policies they do extend. They are tight-lipped about their future plans, but it wouldn't be surprising if the uncertainty prompted many of them to drop out just before the 2014 elections. But without their participation, both Obamacare's and Democrats' prognosis will considerably worsen, regardless of the final verdict.

Obamacare's lesson is that you can jam unpopular laws down people's throat, but you can't force them to keep them down.

SHIKHA DALMIA, a Washingon Examiner columnist, is a senior policy analyst at Reason Foundation, a nonprofit think tank advancing free minds and free markets.
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