The Obamacare Fix’s Legality, State Law and Standing

I have a piece in POLITICO discussing the constitutional problems with the ObamaCare fix, which have been previewed here before. One aspect is whether state officials can ignore ObamaCare and instead apply “The Fix.” Regardless of the discretion President Obama has, state officials do not have enforcement discretion over federal law. It is just supreme, and even if the president ignores it, state officials can not.

Unlike prior exercises of presidential enforcement discretion, the fix depends on states violating federal law. That is because it does not change the law on the books. Rather, the feds are simply signaling that they will not enforce certain provisions for some time.

But many parts of Obamacare do have to be applied by states, the traditional front lines of insurance regulation. States, however, lack “enforcement discretion” when it comes to ignoring federal law, even when the president thinks it would be a good idea. As the president has often reminded us, the ACA is “the law of the land,” and remains so after the fix.

The Constitution’s Supremacy Clause makes federal law—not presidential policies— binding on the states. So what’s a state insurance commissioner to do? Federal law requires health plans to have a mandatory level of “minimum coverage.” Thus it is not clear how a state insurance commissioner can authorize a plan that violates federal law.

But state officials may encounter the ACA in different ways. In some states, it will have the general preemptive force of federal law. So states that authorize non-compliant plans pursuant to the Fix would be in conflict with federal law.

A more interesting scenario involves states that have passed “conforming legislation” to “domesticate” the ACA to make it more convenient to enforce. In such states, the ACA is both federal and state law, and at the enforcement level, primarily the latter. Whether state officials could implement the Fix would thus turn in part on state constitutional and administrative law about the scope of “enforcement discretion.” The answers will vary, but in some states, the executives will not have the power under state law to do it, regardless of federal law.

But the incorporation of the ACA by reference into state statutes raising interesting possibilities for getting around standing hurdles to challenging the Fix, which I’ll spell out here in greater detail than the POLITICO piece. States are not bound by Art. III’s restrictive standing rules, and thus in some states, a decision to implement the fix could more easily be reviewed by state courts. Of course, this will potentially lead to multiple answers about the legality of the Fix, and further anarchy. But the state-law route still leaves room for SCOTUS review. Arguably the state courts would be ruling on a question “arising under federal law,” despite its being framed by a state statute.

This is the murky doctrine of Merrill Dow/Grable line of Supreme Court cases about federal issues in state law causes of action. If there would not have been an Art. III case or controversy, the Supreme Court could potentially still hear an appeal under the doctrine of ASARCO v. Kadish under certain circumstances, basically when the state-court plaintiff wins. So Supreme Court review would be a Merrill Dow/Grable question nested in an ASARCO question – really neat! I take a dim view of both doctrines, by the way.


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