Pedro Rojas holds a sign directing people to an insurance company where they can sign up for the Affordable Care Act, also known as Obamacare, before the February 15th deadline on Feb. 5, 2015 in Miami, Fla.
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Procedural problem could derail Obamacare lawsuit

Could the latest high-stakes challenge to Obamacare be stumbling just short of the goal line?

For the last two years, four challengers have waged a pitched battle with the Obama administration over whether the Affordable Care Act authorizes subsidies that make insurance affordable for millions of people. The stakes are huge: Without the subsidies, more than 8 million Americans would lose their insurance.

The case, King v. Burwell, has reached the doors of the Supreme Court. Yet now, just weeks before the much-anticipated oral argument, questions suddenly have surfaced about whether the challengers can be in court at all.

“We’re three weeks out from the legal test that could make or break Obamacare, and it’s not entirely clear that the Supreme Court can even hear the case.”
Dominic Perella
To sue in federal court, a plaintiff must show that he has so-called “standing” – that he suffered an injury, and that if he wins in court the injury will be redressed. If either piece is missing, the court has no power to hear the case.

That brings us to the protagonists in this drama: Virginia residents David King, Rose Luck, Brenda Levy, and Douglas Hurst. Obamacare opponents hand-picked these four regular-Joe plaintiffs to serve as figureheads in the King lawsuit. They argued in the lower courts that the four have standing to sue because – counterintuitively – subsidies that make insurance cheaper actually hurt them.

The theory goes like this: The Affordable Care Act’s “individual mandate” requires people to buy health insurance. However, the mandate doesn’t apply to people for whom insurance is unaffordable, and it defines “unaffordable” to mean more than 8% of household income. The plaintiffs told the lower courts that insurance on the Obamacare exchanges would cost more than 8% of their income without subsidies, so they wouldn’t have to buy it. But with subsidies, insurance costs less than 8% of their income. Thus the subsidies actually hurt them: They didn’t want insurance, but the subsidies catapulted them within the individual mandate, meaning they had to either buy insurance or violate the mandate and pay a tax penalty.

In the lower courts, the government poked holes in that argument for two of the plaintiffs. It ran the numbers and showed that for Rose Luck and David King, insurance would be “unaffordable,” and they wouldn’t have to buy it, even with the subsidies. Thus Luck and King weren’t injured; they lacked standing.

The plaintiffs didn’t fight back. Instead, they relied on the standing of the other two plaintiffs, Brenda Levy and Douglas Hurst. That was enough because only one plaintiff needs standing for the lawsuit to continue. But in recent days, published reports have cast doubt on Levy and Hurst’s standing too.

Levy said she had standing because at her projected income level for 2014 – $43,000 – she would be within the individual mandate with subsidies but not without them. But she said she earns a living as a substitute teacher, and the school where she works has told reporters she made less than $10,000 a year there. It’s possible she has other sources of income, but if so, she hasn’t yet proved it in court.

Hurst, meanwhile, served in the military and may be eligible for free VA health coverage. If so, that means he could cure his supposed “injury” – being forced to either pay for insurance or pay a tax penalty – by signing up for free care. Hurst could argue that he’s still injured, legally speaking, by having to sign up for something he doesn’t want, even if it’s free. But that argument is a close call at best. A court could find that isn’t enough of an injury to create standing.

The bottom line: We’re three weeks out from the legal test that could make or break Obamacare, and it’s not entirely clear that the Supreme Court can even hear the case.

Whether the court will wade into this standing issue is another question. The Obama administration hasn’t contested the plaintiffs’ standing in its Supreme Court briefs, perhaps because this issue is kicking around in the lower courts and is going to have to be decided sooner or later anyway. And the court could ignore the issue on the theory that no one challenged Levy’s income projection and that under that projection she has standing.

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But it’s also entirely possible the court will ask Levy and Hurst to prove they have standing. If they can do so, the legality of Obamacare subsidies will be resolved come June. But if they can’t, the court would have to dismiss the case when it issues its ruling. That would mean a delay of another year or more before the court can hear another lawsuit raising the same issue.

And that could be a nightmare for Obamacare’s challengers: another year for more people to sign up for insurance through the exchanges, and for more people to reap the benefits of subsidies. The more deeply ingrained the Affordable Care Act becomes, the harder it may be for a court to strike down one of its key pieces.

Dominic Perella is a Supreme Court and appellate practitioner and a partner at Hogan Lovells US LLP in Washington, D.C. He authored an amicus brief on behalf of several hospital associations supporting the government in the King case. The views in this column are his own and not those of his clients.

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Procedural problem could derail Obamacare lawsuit