It has been widely reported that people are having trouble buying healthcare through the online exchanges due to technical difficulties, a situation President Obama addressed from the Rose Garden on Monday, saying “no one is madder than me” and encouraging people to try to sign up by telephone rather than online. Ezra Klein calls the rollout, so far, a “failure” but says the real question is how long it takes for the exchanges to get running smoothly.
Klein is right about that: it would seem unfair to impose a tax on someone for failing to obtain insurance if they tried but were unable to do so due to problems with the government-run website. Yet that is what the well-known individual mandate codified at 26 U.S.C. § 5000A(b)(1) says: a taxpayer who goes a month (or more) without health insurance after the effective date must pay a tax penalty. There is no exception for taxpayers who tried and failed to get health insurance through the exchanges. Or is there?
At bloomberg.com, Nicholas Bagley and Austin Frakt propose that if it comes down to it, the Obama Administration could legally delay the individual mandate, without the assistance of Congress, by invoking the “hardship” exception to the individual mandate codified at 26 U.S.C. § 5000(e)(5) en masse. Their argument goes as follows: The statute says that the mandate does not apply to an individual who obtains certification through the exchange that “there is no affordable qualified health plan available through the Exchange.” To my eye, the exception appears intended to apply to individuals who, for one reason or another, cannot “afford” coverage, and as Bagley and Frakt acknowledge, that is how the Secretary has interpreted it in her rulemaking on the subject. But Bagley and Frakt say it could be interpreted to apply en masse–to all taxpayers in a state–if there are simply “no . . . qualified health plan[s] available through the Exchange” due to, relevant here, technical failures.
Bagley’s and Frakt’s proposed interpretation is interesting, but I see three reasons why the Administration will hesitate to adopt it, even if the problems with the exchanges do not resolve themselves soon and the administration determines any political cost of a delay would be worth it. First, the Administration would run a significant risk of having any delay vetoed by a court. My armchair intuition is that, in light of the context of the “hardship” exception, the presumption against finding elephants in mouse holes, and the carefully-crafted application process Congress built into the exception provision (which they reference), Bagley’s and Frakt’s interpretation is on the edge of being a reasonable one that a Court would accept. I could see a Court holding that their interpretation is contrary to the unambiguous meaning of the statute, because the clear intent of the provision upon which they rely is to provide exceptions on a case-by-case basis to those who cannot afford insurance, but Bagley’s and Frakt’s interpretation would use the provision to provide exceptions en masse without regard to affordability. On the other hand, I could also see a Court holding that the text of the provision itself does not foreclose Bagley’s and Frakt’s proposed interpretation, and therefore deferring to it (were the Secretary to adopt it through rulemaking).
Another reason I believe the Administration would think twice before adopting Bagley’s and Frakt’s interpretation is that by so doing they would open themselves up to lawsuits alleging violation of the “exchange mandate”–the statutory requirement that “the Secretary shall . . . establish and operate” an exchange in any state that opts not to run its own. As it is, all the ongoing problems arguably support a suit for violation of that mandate–does “operate” have an effectiveness or usability requirement?–but such a case would be much stronger if the Administration effectively admitted that it had failed to setup meaningful exchanges, which is what it would have to do for Bagley’s and Frakt’s interpretation to work.
Finally, the Obama Administration may view the precedent it would set were it successfully to delay the mandate by invoking Bagley’s and Frakt’s interpretation to be a dangerous one. If this Administration can save the taxpayers the pain of its failure (so far) to run effective exchanges, then what would stop a future administration from doing the same thing to save the taxpayers the pain of a willful (or perhaps just negligent) failure to run working exchanges? Those who oppose the individual mandate are going to be watching the Obama Administration’s current moves very closely for any precedent that a future President might use to delay or destroy the mandate by fiat, and Bagley’s and Frakt’s proposed interpretation would create just such an opening.