Why The Challenge To Obamacare Matters To You?

November 12, 2014 at 7:41 am Leave a comment

Last Friday, the Supreme Court granted an appeal in the case of King v. Burwell.  This move has gotten a lot of attention because if the Court rules against the Administration, Obamacare is gutted.  Let’s face it, healthcare has joined politics and religion as a subject you don’t discuss at dinner parties – unless, of course, you’re really bored and want to liven things up a bit.  So maybe it’s not surprising that lost in all the media coverage is the fact that whether you support or oppose Obamacare, the case is directly relevant to any institution subject to federal regulation.

The case will give the Court the opportunity to delineate precisely how much flexibility agencies have when making regulations intended to implement federal legislation.  I know that doesn’t sound quite as interesting as saying the case could gut Obamacare, but it means that this case is much more likely to impact the regulatory environment in which credit unions operate than the first challenge to Obamacare upheld in 2012.  The GAO estimates that the federal government promulgates between 2,500 and 4,500 regulations on an annual basis.  Any time the Supreme Court weighs in on how much power agencies have to promulgate these rules, it’s worth paying attention to.

A core component of the Affordable Care Act (ACA) is the establishment of exchanges through which individuals can purchase health insurance.  Section 1311 provides that “each state shall, not later than January 1, 2014, establish an American Health Benefit Exchange.”  However, a subsequent section provides that if a state chooses not to establish an exchange, the Secretary of Health and Human Services is required to establish an exchange within that state.  Only 16 states, including New York, and the District of Columbia established health care exchanges.

Crucially, tax credits are provided for millions of individuals to help offset the cost of health insurance purchased through the exchanges.  Specifically, the Act provided that such subsidies are available to a tax payer enrolled in a health plan “through an exchange established by the State.”  The IRS was given responsibility for implementing this provision.  It decided that the statute was designed to make health care subsidies available to all eligible individuals who purchased health insurance through an exchange regardless of whether that exchange was run by the federal or state government.  The issue in this case is how much flexibility the IRS had to interpret the pertinent language as applying to both federal and state exchanges.

This is the part of the debate relevant to credit unions.  As we are all too aware, Congress routinely passes huge statutes with vague language.  How much flexibility agencies have in interpreting these provisions is governed by a well-established judicial framework.  Where a statute is clear, agencies are responsible for implementing its plain meaning.  However, where a statute is susceptible to more than one interpretation, courts defer to the agency’s interpretation so long as it is reasonable.  This is the reason, for example, why the Court of Appeals for the District of Columbia Circuit  ruled that the Federal Reserve acted within its power when it determine the criteria to be used when establishing the debit interchange cap.  Critics of so-called Chevron deference argue that this approach gives agencies too much flexibility.  This case gives the Court’s conservative wing a high profile case in which to criticize or limit an agency’s discretion in writing statutes.

Why does all this matter?  Because every day credit unions and their associations lobby Congress and make good faith efforts to comply with regulations spawned by Congressional enactments.  The less flexibility regulators have, the more important the legislative process becomes.  Conversely, the more flexibility agencies have then the more the legislation passed by Congress is simply the first stage of an increasingly convoluted law making process.

Speaking of court cases, the NCUA has filed another lawsuit seeking to recoup losses to the Share Insurance Fund stemming from the purchase of mortgage-backed securities.  This lawsuit is against Deutsche Bank National Trust Company.  It alleges that the company failed to properly exercise oversight over the purchase of mortgage-backed securities purchased by U.S Central, WesCorp, Members United, Southwest and Constitution between 2004 and 2007.

Entry filed under: Advocacy, Legal Watch, Regulatory. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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