• Is Obama’s “like it/keep it” fix legal? — ctd.

    The following is a guest post by Nicholas Bagley, University of Michigan Assistant Professor of Law.

    I speculated last week about the legal basis for the administrative fix that the president announced to deal with the “like it/keep it” fiasco. Since then, the administration has offered a new hint about its thinking. According to press accounts, it means to defend the fix—which delays application of the ACA to insurance plans currently sold on the individual market for one year—as an exercise of its enforcement discretion.

    I’m not sure this rationale works. The administration’s claim rests on an expansive reading of Heckler v. Chaney, an important Supreme Court decision from 1985. In Heckler, the Court held that agencies have wide discretion to decide whether, when, and how to enforce the law. No agency, the Court explained, has enough resources to police every technical legal violation. Instead, agencies must set priorities based on a host of factors—the harm caused by the violation, the likelihood of prevailing, the need to conserve scarce resources, and the like. Courts shouldn’t second-guess how an agency weighs all those factors. Enforcement, in the legal jargon, is “committed to agency discretion by law.”

    But just how far does the Heckler principle go? Although federal agencies have wide discretion to decline to prosecute, they can’t dispense with the law altogether. That would contravene the President’s constitutional duty to “take Care that the Laws be faithfully executed.” The difficulty is that there’s no crisp dividing line between non-enforcement of the law (which is OK) and ignoring the law (which is not). In principle, you could spin the like it/keep it fix either way. It’s both a decision not to enforce the law against a discrete set of plans and a decision to dispense with the law as to those plans.

    The administration’s legal defense rests on the claim that the fix falls on the non-enforcement side of the ledger. Maybe. But I see four reasons to worry. First, it’s not the federal government’s job to enforce the ACA’s insurance rules. That’s up to the states. It’s hard to justify the administrative fix as an exercise of enforcement discretion when someone else is doing the enforcing. (The feds can step in if a state fails to “substantially enforce” the ACA. But the states were prepared to enforce the law, which is why insurers canceled their non-conforming plans in the first place.*)

    Second, Heckler is mostly concerned with giving agencies the space to make “discretionary judgment[s] concerning the allocation of enforcement resources.” The administration’s decision to stop deporting DREAMers, for example, can be defended as that kind of judgment. With millions of people in violation of the immigration laws, it’s sensible to devote limited resources to deporting the worst offenders. Here, in contrast, the fix doesn’t really have anything to do with resource allocation. Wedging it into the Heckler rule may therefore be hard.

    Third, Heckler’s general assumption that agencies have enforcement discretion can be rebutted where a statute constrains that discretion. Here, the ACA probably does. On Thursday, the president acknowledged that he was trying to “fix” the ACA’s grandfather clause, which, in his view, was drafted too narrowly. But doesn’t that clause stand as persuasive evidence that the plans that it covers are the only ones that Congress wanted to grandfather? Whatever the scope of its enforcement discretion, the administration probably can’t exercise that discretion to deliberately rewrite the statute.

    Fourth, the D.C. Circuit has suggested that Heckler should be confined to “single-shot” decisions not to enforce against small, discrete sets of violators. In words that seem pertinent here, the court has said that “an agency’s pronouncement of a broad policy against enforcement poses special risks that it has consciously and expressly adopted a general policy that is so extreme as to amount to an abdication of its statutory responsibilities.” Distinguishing between single-shot decisions and broad policies isn’t as easy as you might think—even the agency choice at issue in Heckler wasn’t, strictly speaking, a single-shot decision. But the breadth of the fix is another strike against it.

    In short, I’m uncomfortable with the “enforcement discretion” justification. Because I haven’t yet seen a complete legal defense, I remain open to persuasion. As it stands, however, the administrative fix looks awfully vulnerable to legal attack.

    * Actually, it’s a little more complicated than that. Six states, including Texas, have said they won’t enforce the ACA’s new insurance rules. The federal government will have to enforce the law in those states. On the whole, however, the states remain primarily responsible for enforcing the ACA.

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    • Nick

      How do you place in context what you said above with the Administrative Procedures Act?

      Two existing positions (?) allowing different interpretations of how WH actions can be judged–one from SCOTUS permitting perhaps narrower moves, and a statute giving exec branch authority time to ease a transitional period from a new law,

      I am assuming Heckler v Chaney not based on Act I cited above. If it is, I guess my question moot.

      Brad

    • Brad,

      Some commentators have suggested there’s authority for the position that agencies have the power to waive effective dates to ease transitions. I’m unaware of any such authority.

      To the extent that they’re pointing to the APA provision authorizing courts to force agencies to take actions that they have “unreasonably delayed,” I think they’re looking in the wrong spot. There’s no claim here that a federal agency has failed to act when it should have. The claim is that the federal agency has acted when it shouldn’t have. The “unreasonable delay” provision of the APA doesn’t speak to that.

      Nick

    • Thank you for the outstanding post. I wanted to add a bit of clarity around your third point from a practitioner’s viewpoint.

      • “Third, Heckler’s general assumption that agencies have enforcement discretion can be rebutted where a statute constrains that discretion. Here, the ACA probably does. On Thursday, the president acknowledged that he was trying to “fix” the ACA’s grandfather clause, which, in his view, was drafted too narrowly. But doesn’t that clause stand as persuasive evidence that the plans that it covers are the only ones that Congress wanted to grandfather? Whatever the scope of its enforcement discretion, the administration probably can’t exercise that discretion to deliberately rewrite the statute.”

      This particular argument is assuaged some. PPACA itself was rather vague on a “Grandfatherd Plan”. Those of us in the industry were hopeful that would mean any employer sponsored plan as defined in ERISA (or any health plan in place in the individual market). It was the the subsequent regulations issued that made it virtually impossible for a plan to stay Grandfathered. To date approximately 3 in 4 employer plans have already lost that status.

      So the Administration will argue that this “fix” is a loosening of their regulations, not the statute.

      Best,
      Craig

    • Take a look at Brennan’s concurrence:

      This general presumption is based on the view that, in the normal course of events, Congress intends to allow broad discretion for its administrative agencies to make particular enforcement decisions, and there often may not exist readily discernible “law to apply” for courts to conduct judicial review of nonenforcement decisions. See Citizens to Preserve Overton Park v. Volpe, 401 U. S. 402, 410 (1971).

      I also agree that, despite this general presumption, “Congress did not set agencies free to disregard legislative direction in the statutory scheme that the agency administers.” Ante, at 833.

    • As a non-lawyer I may be wrong on this, but it seems to me that the administration is not delaying implementation because they can’t figure out in time how to do it, nor are they simply focusing resources elsewhere. They are simply announcing that the enforcement of the law would be politically problematic, and they’d prefer not to face the political results of implementing their own law. I’m not sure why the Supreme Court would find that an appealing reason to delay this portion of the law.

      One question I have is, if the policy isn’t legal, who has standing to challenge it? I assume Congress, but what about insurers (not that I think any of them would)?

      Also, regardless of whether the law is enforced, the plans remain illegal, and illegal contracts are unenforceable (please keep in mind that’s my college business law class from 20+ years ago speaking, so I may be wrong on this). In the event of a legal dispute between insurer and insured, wouldn’t one argument be that the policy is illegal and therefore can’t be enforced?

    • I think the issue with state vs. federal enforcement is likely the only one with merit. There are literally thousands of federal laws that go unenforced. For example, technically adult websites are against federal law. You can’t use a computer system to transport obscene pictures across state lines. Most Americans have no idea that it’s even illegal purely because it’s so rarely enforced. When G. W. Bush first took office, Ashcroft made some comments that he may actually start enforcing it again (but he never really did). Similarly, whenever there’s a president who isn’t so fond of the EPA, it’s not uncommon for many EPA regulations to suddenly go unenforced. Note that these are examples are of very widely unenforced laws, which would seem to contradict the 4th point in your essay.

      In all of these cases, anyone with standing who can prove harm in need of redress can sue the gov’t to have enforcement reinstated.

      There’s even a weird side-effect of this. For example, selling heroin is illegal (and enforced), but since it’s illegal, there aren’t the sort of regulations you get with legal activities. There is no equivalent to an FDA meat inspector checking the quality of heroin. Illegal activities don’t have statutes concerning how the gov’t should regulate the activity since the activity itself is illegal. But if that banned activity is not enforced, then you end up with an activity that happens without fear of prosecution and is legal in a de facto sense, but also totally unregulated. That creates an odd situation where something that is illegal can be less monitored and less controlled than something that is legal, but highly regulated.

    • Leaving enforcement to the states never worked for civil rights. It has never worked for most workplace rights. It has worked very poorly for Medicaid.

      After all the comparisons of the ACA to national health insurance, I had no idea that the states were so important to its enforcement.

    • I think the other big point is that there is a difference between declining to enforce a law and encouraging people who were otherwise prepared to comply with the law to violate it. The reality of the situation is that all insurance provides were ready, willing, and able to comply and there would have been no enforcement action. By speaking the president expressly instructed them to change path and violate a law they would otherwise have complied with – without the need to expend enforcement resources.

    • These are very scary times. A sitting president has never asked a major U.S. corporation, much less several, to intentionally violate federal law, until now.

    • Allow me to share an idea I have about the Affordable Care Act and to ask for support.

      Some people in the individual market who got substandard policies have had these policies canceled because of the Affordable Care Act. I propose an alternative to having these policies temporarily reinstated as a political “fix.”

      Simply guarantee that these people will get a better deal in the federal (or a state) exchange. In most cases, this is already true.

      In the exceptional cases in which premiums and/or deductibles are higher in the exchange, allow those individuals to purchase a policy with a lower or comparable deductible, with their premiums subsidized so that they will not pay more, even if they do not qualify under the income standards for the subsidies.

      In other words, provide an ad hoc subsidy in these rare cases, so that no one is financially disadvantaged by the cancelations. Indeed, in all these cases, these individuals will end up with better coverage.

      Perhaps it is possible to do this administratively, so that it does not become entangled with Republican obstructionism in Congress. If it does require legislation, the president will be in a strong position to veto anything else besides this proposal, as it will improve the circumstances of those whose policies were canceled.

      Please click on the link below to sign on to this as a We The People petition. Over one hundred supporters will be required before the petition will be made public online. Thank you.

      http://wh.gov/lBsMx

      • This would require a huge increase in the appropriation
        required for subsidies, and thus require the house to pass a bill
        funding it. Nice idea though.

    • Anecdotal experience… My wife’s policy was cancelled. It
      was a good policy (high deductible but otherwise comprehensive
      coverage through Kaiser). Went to the exchange and found a cheaper
      policy (not Kaiser). Also, may be eligible for subsidy. ACA is
      looking good here. I imagine that the really cheap policies were
      what Bill Maher called “hospital gown policies” (they don’t cover
      your ass) and it’s really better all around that these are
      eliminated.