Grounds for Dismissal

03.04.15 10:25 AM ET

The Technicality That Could Save Obamacare—and the Supreme Court’s Reputation

Newly revealed information suggests that King v. Burwell, the case against Obamacare, should be dismissed for lack of standing.

Could the Supreme Court dodge a bullet by dismissing King v. Burwell, the case that could kill Obamacare, on procedural grounds?

Maybe, says a growing chorus of legal observers. It turns out that one of the most basic requirements of a legal case—that the plaintiffs have standing to sue—is deficient in King. Starting with King himself.

Let’s back up a bit. Cases like King are, invariably, initiated and litigated by large public interest organizations. This is true on the right and left. For example, Edie Windsor may have been the “named plaintiff” of 2013’s same-sex marriage case, but it was the ACLU (and its New York affiliate) that conceived the case, and hired and paid the law firm of Paul, Weiss and their star lawyer, Robbie Kaplan. 

In the case of the Obamacare challenge, the libertarian Competitive Enterprise Institute—funded by an array of industries, led by the energy sector, but including Google and Facebook too, as well as the Koch brothers—is paying the bills, including that of the Jones Day law firm.

But while interest groups may pay the bills, courts can only hear “cases and controversies” in which someone is actually harmed. In Windsor’s case, that was easy; because her marriage wasn’t recognized, she had to pay hundreds of thousands of dollars in taxes. 

In King, it’s not so easy. Recall that the specific issue in King is whether federal tax credits are available to everyone who qualifies, or only people living in states with state-run exchanges. The case rises or falls on the phrase “established by the State.”

Now, how could someone be harmed by getting a tax break?

Well, as the Fourth Circuit said, “if [plaintiffs] were not eligible for the premium tax credit, they would qualify for the unaffordability exemption… and therefore would not be subject to the tax penalty for failing to maintain minimum essential coverage.”

Got it? For a very narrow band of people, their income before the tax credit makes insurance too expensive. But with the tax credit added, now they have to purchase insurance or face the penalty.

This is already an extremely tenuous form of injury: because of one provision of Obamacare, I’m not eligible for another provision of Obamacare, so please destroy Obamacare. (According to most observers, the entire system will collapse without the tax credits.) 

But, theoretically, it’s enough to get to the merits.

So, how do you find the people who are just poor enough and just rich enough to be on the cusp? Turns out, those people are the ones for whom insurance costs would be right around 8% of their annual income—the threshold for the unaffordability exemption. If the costs were above that threshold, then they’d be exempt. But if the costs were below it, because of the tax credit, then they’d have to enroll.

One way to find the 8-percenters would be to file a class action, but for some reason, Jones Day didn’t do that. (At oral argument, one circuit court judge said this was because “nobody wants what you’re after here”—i.e., the loss of a tax credit.) Instead, CEI and its lawyers set out to find just those people. (They also had to live in a state without a state-run exchange, but that was easy.)

Unfortunately for CEI, some clever sleuthing by Mother Jones has led numerous legal experts, and the conservative Wall Street Journal editorial page, to question the four that they found.

First, the case is a ticking time bomb, because three of the four are about to be eligible for Medicare, thus wiping out any potential injury from Obamacare.

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Three of them, as colorfully reported by Stephanie Mencimer in Mother Jones, are also wackos.

Wrote Mencimer, “one has called [President Obama] the ‘anti-Christ’ and said he won election by getting ‘his Muslim people to vote for him.’” Another couldn’t stop talking about Benghazi. A third has no idea how she even got involved in the case.

Legally, however, this is all just a sideshow. Let’s look at the nuts and bolts of each plaintiff’s standing claim—and see where it falls apart.

David King. The name plaintiff in the case, David King, is a veteran, and thus eligible for free medical care with no premiums whatsoever. He even enrolled with the VA (he says, no joke, that he did it for the coupons at Lowe’s). Despite this, he said in court papers that he was “not eligible for health insurance from the government or any employer.” That statement is clearly false. Asked about this by The Wall Street Journal, King said he didn’t recall his lawyers asking about his veteran status.

Moreover, Mother Jones found that, because King is a smoker, the cheapest insurance plan available to him, even with the tax credit, would cost 12% of his income. In other words, he is doubly exempt: first because he’s a veteran, and second because he would already qualify for the unaffordability exemption. The King of King v. Burwell has no standing—twice over.

Rose Luck.  The inaptly named Rose Luck filed her papers using the address of an extended-stay hotel; she had just lost her home through foreclosure, and had piles of huge medical bills. Even with the subsidy, the cheapest insurance available to her would cost $322 per month, or 8.5% of her income. That’s above the threshold. She has no standing. (Indeed, she may also lack standing because the hotel address doesn’t count as a legal residence.)

Two down, two to go. 

In fact, the Fourth Circuit, noting that King and Luck appeared not to reach the income thresholds, based their standing decision only on the other two plaintiffs. Namely:

Doug Hurst. Like King, Doug Hurst is a veteran, although he apparently is not enrolled with the VA and so this status may not have been known to the Fourth Circuit. Since he is eligible for free insurance, though, Durst wouldn’t be penalized for not purchasing insurance under Obamacare. Moreover, he, like King, falsely stated that he was “not eligible for health insurance from the government or any employer.”  This is clearly not the case. It is hard to see how Hurst could possibly have standing to sue.

Brenda Levy. That leaves Brenda Levy, the 64-year-old woman who didn’t know she was a party to the case, and, when confronted by Mother Jones’s Mencimer, said, “I don't like the idea of throwing people off their health insurance,” which, of course, is what would happen to 8 million people if she prevailed in her lawsuit.

More importantly, Levy’s employer listed her total income as $10,000. If that is her total income, she is completely exempt from Obamacare.  CEI has subsequently argued that she may have other income, but it has not established this.

So, let’s review: The only one of the four plaintiffs who might possibly have standing is someone who doesn’t know how she got involved in the case, hasn’t attended any of the court proceedings because she “didn’t think the case was going anywhere,” has expressed opposition to the case’s primary impact—and has not documented income anywhere near the level necessary to establish injury.

Legal observers quoted in Slate, Bloomberg Politics, Mother Jones, and The Wall Street Journal agreed that, at a minimum, it shows that CEI had to dredge the bottom of the barrel to find any eligible plaintiffs, as that Fourth Circuit judge suggested. More importantly, as they’ve all noted, if there’s no standing, there’s no case. And the entire lawsuit now hangs by the very slender reed of Brenda Levy’s alleged additional income.

Now, courts sometimes brush aside standing concerns when they want to get to the merits of a case. But this isn’t just any case; it’s yet another high-profile political showdown. And some justices may find themselves between a conservative rock and a legal hard place, since it would take interpretive yoga to read the statute the way CEI suggests. 

Standing could offer a way out. It would allow justices to avoid the statutory interpretation entirely. And, most likely, it would be the last time this issue arises. Not only are these particular plaintiffs about to be eligible for Medicare, but the train is rapidly leaving the station on Obamacare in general. It’s hard to see the right-wing alliance holding out much longer, as even congressional Republicans are looking at reform, rather than repeal. 

Oh, and another thing. Dismissing for lack of standing might also be what the law requires.