A Case Study On Why The Obamacare Lawsuit Is Based On Mythical History

04/06/2015 09:18 am ET | Updated Apr 09, 2015
AP Photo/Brynn Anderson

WASHINGTON -- Four years ago, Alabama’s new Republican governor, along with the state's first majority-GOP legislature since Reconstruction, faced a tough, high-stakes decision: Make the best of a federal health care reform law they hated, or stiff-arm President Barack Obama.

Even in this conservative Southern state, it wasn’t an easy call. Gov. Robert Bentley (R) had campaigned on a platform that supported creating a health insurance exchange, a pillar of the Affordable Care Act, which he otherwise opposed. Five months after taking office, Bentley impaneled a commission to advise him whether Alabama should establish a state-run exchange or let the federal government create one for them. The key state legislators got to work.

The Bentley administration, the Alabama legislature and the governor’s Alabama Health Insurance Exchange Study Commission weighed many of the same issues their counterparts in other states did. How would they finance the exchange's operations? Should a state agency or some other entity manage a new marketplace? How heavily should insurance companies be regulated? Would it better for Alabama to exert at least a little control over Obamacare, or to just let the U.S. Department of Health and Human Services do the work?

One thing they didn’t seem to consider was whether Alabamians would be able to receive subsidies to make their health insurance more affordable if the state defaulted to a federally operated exchange, according to documents and interviews with principal figures in the debate.

The absence of consideration of that critical provision is remarkable in light of judicial and political developments over the past year. In June, the Supreme Court is expected to issue a ruling on King v. Burwell, a lawsuit alleging that these tax credits should only be available in state-run exchanges.

The consequences for those in Alabama and 33 other states who get health insurance from federally operated exchanges could be dire. More than 220,000 Alabamians are enrolled in plans obtained on the federal exchange, and more than 165,000 of them receive subsidies that could be eliminated by the high court, according to federal data compiled by the Henry J. Kaiser Family Foundation.

The plaintiffs in King v. Burwell, and their allies, want the Supreme Court and the American public to believe not only that the precise wording of the Affordable Care Act -- the phrase “established by the State” -- makes these subsidies permissible only in state-run exchanges, but that this was the clear intent of Congress and was fully understood by state officials when they were deciding which path to choose.

“Any English speaker would immediately understand that no subsidies are available for coverage obtained on an exchange established by HHS,” reads the brief filed by the plaintiffs to the Supreme Court.

And here’s what it says in an amicus brief signed by Alabama Attorney General Luther Strange (R) and his counterparts in five other states in support of the lawsuit: “In making their exchange-establishing decisions, the states were well aware that the plain text of Section 36B conditioned the availability of tax credits on states establishing exchanges.”

If that was the case four years ago, no one told Alabama state Sen. Jim McClendon (R), a native English speaker who co-chaired Bentley’s commission while a member of the state House of Representatives, which unanimously passed a bill in April 2012 to establish an Alabama health insurance exchange.

“No. No. No. That was never, never brought up,” McClendon said in an interview with The Huffington Post last month. “I was unaware of that stipulation in the Affordable Care Act, and I would almost have to guess that anybody involved in this process was not aware of it. I was a little surprised when it came up eventually. Nope. I was the chairman of the commission and I was totally unaware of that.”

In other words, according to McClendon, at no point during the commission’s five meetings between September and November 2011, nor during a legislative debate that stretched into the spring of 2012, did anyone conceive of the most significant consequence that could result from Alabama opting for a federally run health insurance marketplace. The commission ended up unanimously recommending a state-run exchange.

alabama state capitol

Three other people who served on the 15-member Alabama Health Insurance Exchange Study Commission, as well as Robert Carey, a Boston-based consultant hired by the state Department of Insurance to advise the panel, also said the tax credits issue never came up during the commission’s work.

“Never. It was never discussed,” said Carey, who also worked with Delaware and Tennessee on their exchanges at the time, when he was a subcontractor working for LMI, a Tysons, Virginia-based government contractor. “It was never a consideration that they weren’t going to get subsidies if they deferred to the feds. I mean, I was there at every commission meeting and I was presenting, ‘Here are your options, here’s what I think it might cost you,’ and we did those type of calculations."

“It is mind-boggling to me how everyone has now kind of glommed on to this. ‘Oh, yeah. This was totally discussed, and we knew subsidies wouldn’t be available if we went to the federal exchange.’ It’s just hogwash,” Carey said.

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Jim McClendon (left), then a member of the Alabama House of Representatives and now a state senator, with Gov. Robert Bentley (seated) in 2012.

HuffPost also interviewed Richard Brockman, an attorney at Burr & Forman in Birmingham who represented the Alabama Nursing Home Association on the commission; Rosemary Elebash, state director of the National Federation of Independent Business in Montgomery, who was appointed to the panel by Alabama Senate President pro tempore Del Marsh (R); and Ron Perkins, vice president of Birmingham-based Doozer Software, who was appointed to the commission by Alabama House Speaker Mike Hubbard (R).

Here’s how they responded to the question of whether they discussed the possibility that tax credits wouldn’t be available if Alabama opted for a federal exchange.


No, no, no. I mean, no, no, no. I mean, the notion of finding a needle in the haystack hadn’t occurred to anybody at the time... No, no, no. It never came up, and that is something I would absolutely have remembered.


That was never a discussion. Nobody even knew that... I don’t remember any discussion about that. The only thing that I can remember is, you either establish a state exchange or the feds are going to do it for you. I mean, that was essentially the discussion.


I don’t remember that coming up. I really don’t. I really don’t ever remember that ever being brought up as an issue... I don’t ever remember anybody saying, ‘Well, if we do this and let the feds do it, this is the trade-off down the road'... I’m almost positive somebody would’ve brought it up... During the time, we didn’t know that. After the commission, that’s when all that stuff started coming out. We were like, ‘Oh, wait a minute.’ That could’ve really changed, obviously, the advice to the governor, because I don’t think he would’ve even said we’re not going to do it if it was clear at that point in time, all the way back four, five years ago, that if you don’t do this, here’s the side effect. Because that’s a huge trade-off.

The remaining commissioners either declined to speak to HuffPost, didn’t respond to phone calls or emails, or couldn’t be reached. These parties include Alabama Insurance Commissioner Jim Ridling and state Sen. Greg Reed (R), the co-chairman of the commission and then-chairman of the Alabama Senate Health Committee.

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Rosemary Elebash (right) with Alabama Gov. Robert Bentley and first lady Dianne Bentley in 2012.

In addition, HuffPost reviewed hundreds of pages of documents that LMI and Mathematica Policy Research presented to the commission and prepared for a separate series of stakeholder meetings organized by the Alabama Department of Insurance in May and June 2011. None of these documents advised of the possibility that subsidies would be contingent on the type of exchange. Local news stories about the exchange process in 2011 and 2012 that HuffPost reviewed also don’t mention the issue.

This evidence, or lack thereof, reveals a major problem with the claims underlying the Obamacare lawsuit, and is consistent with the assertions of Democratic members of Congress and their aides, along with those of Obama administration officials. These findings also mirror those from a previous HuffPost investigation of documents from numerous other states.

HuffPost did speak to two individuals from Alabama who made contrary, but dubious, claims that the legislature and the commission did, in fact, consider the subsidies question during the time before Bentley rejected a state-run exchange in December 2012.

One was then-Rep. Greg Wren, the lead Republican advocate for an Alabama exchange in the state House, who resigned after pleading guilty to corruption charges last year and currently operates a lobbying and public relations firm in Montgomery. The other was Thomas Younger, now a senior vice president at J. Smith Lanier & Co. in Huntsville, whom Marsh, the state Senate leader, appointed to the commission to represent Alabama’s insurance agents.

Wren and Younger insisted that the subsidies issue now at the heart of the Supreme Court case was part of their calculations at the time, and that it was widely discussed by policymakers including commissioners and lawmakers.

“I’ve got it in my notes,” said Younger, who also said Carey advised the commission about the matter, contrary to Carey’s own account. “Very clearly, it was brought up and discussed."

Younger also stated, incorrectly, that these subsidies would only be available for the first two years that any health insurance exchange existed. The Affordable Care Act does not include an ending date for these subsidies. Younger didn't respond to follow-up requests to provide his documentation, nor did he provide an explanation for why his account conflicts with those of McClendon and others.

Wren was the author of the health insurance exchange bill the state House passed in April 2012, and he championed a state-run marketplace until Bentley’s final decision in December of that year to forgo a state exchange. Wren told HuffPost he still believes Alabama should have its own exchange.

Wren claimed in an interview that he was aware, early on, of a provision in the law that would restrict subsidies to those who purchased coverage on state exchanges. But in a subsequent email, his account shifted. Wren first said that issue came to his attention in 2009, before Obamacare had even passed. In a subsequent email, he wrote that he had misspoken during the interview, and said he'd actually learned of this phrase in 2011.

“I believed at the time that for many reasons, including the possible favorable premium treatment to individuals purchasing from a state exchange, that Alabama should consider this over a federal,” he wrote.

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Greg Wren, then a member of the Alabama House of Representatives, in 2011.

There is little evidence to back Wren's claim that he was aware of the now-controversial provision in Obamacare during his state’s debate over whether to establish an exchange. The former legislator could not offer an explanation for why his version of events differs from those of McClendon and the others interviewed for this article, or why it isn’t reflected in official documents or media accounts from the time.

“At this point I can only say is [sic] I remembered back as best I could,” he wrote in an email.

Wren also acknowledged that he has no documentation from 2010 through 2012 to support his assertions that he understood the phrase “established by the state” could mean that subsidies wouldn’t be available in federal exchanges. The Alabama legislature does not transcribe floor or committee proceedings, so no official record exists of the debate on Wren’s bill.

Wren was often quoted in the local and national press speaking about the advantages of state-run health insurance exchanges in 2011 and 2012, but HuffPost couldn’t find any articles that cited him saying the subsidies wouldn’t be available in federal exchanges.

What defined Alabama's debate over the exchange wasn’t the availability of subsidies. At first, policymakers focused on matters such as how to finance the exchange. Over time, the shifting politics of Obamacare drove action -- and inaction -- in Alabama as Republicans nationwide coalesced around a strategy of complete opposition and obstruction of the law.

Led by Wren -- and initially by Bentley -- Alabama gave sincere consideration to the idea of setting up a health insurance exchange. Prior to becoming governor, Bentley declared that he supported health insurance exchanges, and it was part of his agenda when he took office in 2011. In the meantime, Wren, McClendon and other lawmakers in favor of an Alabama-run exchange were working on the issue in the legislature, but didn't progress so far as a committee vote that year.

The likelihood of a state-run exchange dwindled throughout 2012. The U.S. Supreme Court was set to rule on a previous lawsuit challenging the constitutionality of the Affordable Care Act’s individual mandate and expansion of the Medicaid program. And former Massachusetts Gov. Mitt Romney (R) was challenging Obama’s re-election bid with a vow to repeal Obamacare. Like many other governors from both parties at the time, Bentley cited uncertainty about the court and about the election as reasons to delay making a decision on the exchange.

There were other signs indicating that Bentley’s support for a state exchange was cooling. Three months after his commission recommended a state exchange, the governor dismissed the report, saying ''I'm just not very enthusiastic about it," according to The Birmingham News. In April 2012, Wren complained to the press about campaigns by national anti-Obamacare groups undermining support for his plan. Soon afterward, the Alabama state House approved legislation to establish a state exchange without a single dissenting vote, but the state Senate stalled that legislation in May. The same month, Bentley’s office announced that he would veto the House-passed bill, calling it premature.

Finally, Romney lost, and in December 2012, Bentley announced that Alabama wouldn’t establish an exchange nor expand Medicaid, citing the cost. Bentley also articulated his desire to maintain a united front against Obamacare with his fellow Republican governors, most of whom took the same stance.

The announcement marked Bentley’s first public reference to the legal issue that would ultimately become King v. Burwell. Bentley mentioned the first such lawsuit to make this argument, which Oklahoma Attorney General Scott Pruitt (R) filed in September 2012, but Bentley apparently misunderstood its consequences.

According to a report by Alabama Media Group, Bentley evidently believed the Oklahoma lawsuit would invalidate federal exchanges entirely, not merely the subsidies. "We believe the federally facilitated system they will try to set up, we believe that is unconstitutional," Bentley was quoted as saying.

A Bentley spokeswoman didn’t respond to emailed questions for this story.

CORRECTION: An earlier version of this story misstated that Robert Carey was an employee of LMI, rather than a subcontractor, and that he worked on health insurance exchange planning in West Virginia.

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