Legal Glitch "Has The Potential To Sink Obamacare"

Tyler Durden's picture

As if the technological problems facing Obamacare were not enough, a potentially major "legal glitch" could cause the healthcare law to unravel in 36 states. As the LA Times reports, The Affordable Care Act proposes to make health insurance affordable to millions of low-income Americans by offering them tax credits to help cover the cost. To receive the credit, the law twice says they must buy insurance "through an exchange established by the state." But 36 states have decided against opening exchanges for now. Critics of the law have seized on the glitch. They have filed four lawsuits that urge judges to rule the Obama administration must abide by the strict wording of the law, even if doing so dismantles it in nearly two-thirds of the states. And the Obama administration has no hope of repairing the glitch by legislation as long as the Republicans control the House..."This has the potential to sink Obamacare. It could make the current website problems seem minor by comparison," noted on policy expert.

Via LA Times,



President Obama's healthcare law also has a legal glitch that critics say could cause it to unravel in more than half the nation.




Apparently no one noticed this when the long and complicated bill worked its way through the House and Senate. Last year, however, the Internal Revenue Service tried to remedy it by putting out a regulation that redefined "exchange" to include a "federally facilitated exchange." This is "consistent with the language, purpose and structure … of the act as a whole," the Treasury Department said.




But critics of the law have seized on the glitch. They have filed four lawsuits that urge judges to rule the Obama administration must abide by the strict wording of the law, even if doing so dismantles it in nearly two-thirds of the states. And the Obama administration has no hope of repairing the glitch by legislation as long as the Republicans control the House.




"This is a problem," said Timothy Jost, a law professor at Washington and Lee University. "This case could have legs," although "it was never the intent of Congress to establish federal exchanges that can't do anything. They were supposed to have exactly the same powers."


Michael Carvin, the Washington lawyer leading the challenge, says the wording of the law is what counts. "This is a question of whether you believe in the rule of law. And the language here is as clear as it could possibly be," he said.




"This has the potential to sink Obamacare. It could make the current website problems seem minor by comparison," Cannon said.


Defenders of the law say the courts are being used as part of the political campaign against the law.


"This is definitely heating up. It is now the major focus of the Republican strategy for undoing the Affordable Care Act," said Simon Lazarus, a lawyer for the Constitutional Accountability Center. "The lawsuits should be seen as preposterous," he said, because they ask judges to give the law a "nonsensical" interpretation.




"They are betting on getting five votes at the Supreme Court," Lazarus said. "I don't think it will happen."

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ninja247's picture

"Legal Glitches" didn't stop the creation of the FED, Income Tax, Medicare etc...

NoDebt's picture

Agreed, and this legal "glitch" isn't going to stop Obamacare either.  The exchanges will all be ruled as "state" exchanges even though the federal government finances them in most states.  The insurance sold on them is still state-specific and that's where the deciding line will be drawn.

Details aren't going to take this thing down.  Everyone on both sides of the aisle want the power and control that this law provides.  Those currenly out of power dream of the day they will be in control and weild it.  Those currently in power relish their position over this new found control mechanism.  EVERYONE in the federal government wants this.  Both sides.

Which is why it will stay.  Just like the NSA program will stay.


SMG's picture

I hope you guys are wrong about that.

Obamacare is not about healthcare it is about CONTROL of the peasants for the oligarchs.

If it can be stopped it would be a really good thing.

philipat's picture

Whether ACA fails, (in which case the next step by the Socialist/FSA complex will be a single payer system) or not, the net end result willb be Gubmin will control about 65% of the economy. That's slightly higher than France.

Just sayin...

Troll Magnet's picture

This is not some banana sez the chief criminal of the exceptional United States.

TruthInSunshine's picture

Here's what the courts will proclaim: If a state didn't bother to set up an exchange under the ACA, those in such a state who are enrolled in Obamacare won't qualify for the federal tax subsidies.

This is actually more consistent with the strict interpretation of the wording of the ACA than what is claimed by Michael Carvin in the article.

The end result will be even worse, since hardly anyone will be able to pay the monthly premiums, or even more so, the out of pocket, annual cash deductibles of $6,000 to nearly $18,000 (payments that must be made for Dr visits, procedures, medications, etc. before any coverage kicks in) without the subsidies.


philipat's picture

A broader issue which needs to be discussed is with $6000+ premiums and $6000+ deductibles, when does it stop being Health Insurance and start being a forced donation to health Insurers?

Better to have no insurance, even paying the fines, and have a nice fully-paid vacation in Asia when something serious needs doing. Standards in the Private Hospitals out here (Especially Malaysia and Thailand are very high and prices are less than 1/4 of general US prices, in part because there is competition. So in many cases, the total bill, including Return Business Class airfares, is lower than the cost of staying in the US.

Dirty little secret: The US spends double, as a percentage to GDP, that of other OECD countries and outcomes are worse. It doesn't take a genius to figure out that something is wrong in the US?

Deo vindice's picture

I still think the smart move by the GOP would be to simply let Obamacare be crushed under the weight of its own ineptitude.

It is so hopelessly flawed both in concept and methodology for implementation, that it cannot survive on its own.

The sheer numbers who cannot and will not sign up are of such a magnitude that the government will have to either back down, or play the heavy hand which could turn out to be the very tipping point for civil unrest that many believe is certainly coming.

Whenever you can win a battle by letting the enemy self-destruct, you have gained a true victory.

Cult_of_Reason's picture

CBS: ObamaCare System Threatened From High Medicaid Enrollment In Many States (October 25, 2013)

“A CBS News Analysis Shows That In Many Of The 15 State-Based” ObamaCare Exchanges, “More People Are Enrolling In Medicaid Rather Than Buying Private Health Insurance.” “The disastrous rollout of may have another serious problem: A CBS News analysis shows that in many of the 15 state-based health insurance exchanges more people are enrolling in Medicaid rather than buying private health insurance.” (Jan Crawford, “Medicaid Enrollment Spike A Threat To ObamaCare Structure?” CBS News, 10/25/13)

And If That Trend Continues, There’s Concern There Won’t Be Enough Healthy People Buying Health Insurance For The System To Work.” (Jan Crawford, “Medicaid Enrollment Spike A Threat To ObamaCare Structure?” CBS News, 10/25/13)

GetZeeGold's picture



Send lawyers, guns, and get me out of this - Warren Zevon

GetZeeGold's picture



Anything is possible......we've got some democrats stating in public......WHAT THE HELL WE'RE WE THINKING?


Even Bill Maher is coming out against this nightmare.....that's like getting support from Mao!

SWRichmond's picture

This is a question of whether you believe in the rule of law. And the language here is as clear as it could possibly be," he said

Whether I believe in it or not is not at issue.  The fact remains that no one in power believes in it.

GetZeeGold's picture





I don't think there's much rule of law when a President can pick and chose what part of Congressional law he's going with on a daily basis.

TBT or not TBT's picture

Which is straightforwardly impeachable. That's how far down the rabbit hole we are. Fascism on the march

Bad Attitude's picture

The rule of law is dead. It was on life support for many years, but it died the day Dear Leader and his regime took control. Now, Dear Leader only enforces the laws that further his political objectives, and ignores the laws that impede his political objectives. If he can't get Congress (specifically the Republican controlled House) to cooperate, he just issues an executive order to bypass the law.

This article sums up the current political situation:

Forward (over the cliff)!

Lost Word's picture

If there had been rule of law, the Un-Natural Born citizen, without birth certificate,

Unconstitutional Fraud Obama would not be President,

but the coward congress and judges and justices have abandoned the rule of law.

old naughty's picture

In other (not so many) words, the two snakes, untangling just to prepare for the deadly bite of one another...

Truthseeker2's picture

This really exposes the truth about Obamacare!

"Obamacare: The Hidden Agenda"


knukles's picture

Time for another Executive Order

BoNeSxxx's picture

How is this for a legal challenge to ObamaCare?

As I understand it, the good citizens of USA.Gov now need to PROVE they have healthcare coverage on their tax filing forms, correct?

Would there not be a Constitutional challenge in there somewhere?  Are we not innocent until proven guilty?

Seems to me the burden of proof is on the government and all I need to do is write: Yes.  It's their burden to prove me wrong and non-compliant -- not mine to prove innocence.  

What am I missing here?

Meatier Shower's picture

When dealing with the IRS you are considered guilty until proven innocent.

It has been that way from the beginning.

MisterMousePotato's picture

Absolutely, Deo.

I simply could not fathom (and still cannot) the Republicans' efforts, up to and including political suicide, to accomplish naught but delay Obummercare's pernicious effects for one year (viz., until after the upcoming elections).

What the fuck?

Guess it's not called the Stupid Party for no reason.

spankfish's picture

+1 for the Samuel Francis "stupid party" quote/moniker of the Repubican't Party.

MisterMousePotato's picture

First time I heard Stupid Party was at a P. J. O'Rourke talk given in Moscow right after the fall of the Soviet Union. He had been invited to give a talk explaining America's political system. As best I can recall:

"In America, we have two parties: The Stupid Party and the Evil Party. I am a member of the Stupid Party. Every now and again, the two parties get together in what is called the spirit of bipartizenship and pass legislation that is truly stupid and evil."

Or words to that effect. He is a much better writer than me even though I let him teach me how to write good in an article published in the Harvard or National Lampoon back in the sixties(?). Long time ago.

2bit Hoarder's picture

exactly ... what the progressives simply cannot comprehend is that millions of young, healthy people are not going to rush to the exchanges to pay triple their current insurance premiums to fund this thing.

the concept of individual responsibilty facilitating the greater good will never occur to those who take no personal responsibility.

wee-weed up's picture



Deo vindice said:  I still think the smart move by the GOP would be...

Ha! When has this current crop of GOP congresscritters EVER made a smart move?

They've given Obummer everything he wanted on a silver platter!

ceilidh_trail's picture

Data to back up the "dirty little secret"?

TruthInSunshine's picture

It's all good. Between the deteriorating economy, massively growing debt, onerous ObamaCare tax coming, and "In Fed and Out, Many Now Think Inflation Helps," we'll be recovering in no time:

Ben Bernanke, chairman of the Fed, some of whose officials cite the slower pace of inflation as a reason to continue the stimulus.


Published: October 26, 2013

WASHINGTON — Inflation is widely reviled as a kind of tax on modern life, but as Federal Reserve policy makers prepare to meet this week, there is growing concern inside and outside the Fed that inflation is not rising fast enough.

Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment.

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

The school board in Anchorage, Alaska, for example, is counting on inflation to keep a lid on teachers’ wages. Retailers including Costco and Walmart are hoping for higher inflation to increase profits. The federal government expects inflation to ease the burden of its debts. Yet by one measure, inflation rose at an annual pace of 1.2 percent in August, just above the lowest pace on record.

“Weighed against the political, social and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about,” Kenneth S. Rogoff, a Harvard economist, wrote recently. “It should be embraced.”

The Fed, in a break from its historic focus on suppressing inflation, has tried since the financial crisis to keep prices rising about 2 percent a year. Some Fed officials cite the slower pace of inflation as a reason, alongside reducing unemployment, to continue the central bank’s stimulus campaign.

Critics, including Professor Rogoff, say the Fed is being much too meek. He says that inflation should be pushed as high as 6 percent a year for a few years, a rate not seen since the early 1980s. And he compared the Fed’s caution to not swinging hard enough at a golf ball in a sand trap. “You need to hit it more firmly to get it up onto the grass,” he said. “As long as you’re in the sand trap, tapping it around is not enough.”

All this talk has prompted dismay among economists who see little benefit in inflation, and who warn that the Fed could lose control of prices as the economy recovers. As inflation accelerates, economists agree that any benefits can be quickly outstripped by the disruptive consequences of people rushing to spend money as soon as possible. Rising inflation also punishes people living on fixed incomes, and it discourages lending and long-term investments, imposing an enduring restraint on economic growth even if the inflation subsides.

“The spectacle of American central bankers trying to press the inflation rate higher in the aftermath of the 2008 crisis is virtually without precedent,” Alan Greenspan, the former Fed chairman, wrote in a new book, “The Map and the Territory.” He said the effort could end in double-digit inflation.

The current generation of policy makers came of age in the 1970s, when a higher tolerance for inflation did not deliver the promised benefits. Instead, Western economies fell into “stagflation” — rising prices, little growth. 

Lately, however, the 1970s have seemed a less relevant cautionary tale than the fate of Japan, where prices have been in general decline since the late 1990s. Kariya, a popular instant dinner of curry in a pouch that cost 120 yen in 2000, can now be found for 68 yen, according to the blog Yen for Living.

This enduring deflation, which policy makers are now trying to end, kept the economy in retreat as people hesitated to make purchases, because prices were falling, or to borrow money, because the cost of repayment was rising. 

“Low inflation is not good for the economy because very low inflation increases the risks of deflation, which can cause an economy to stagnate,” the Fed’s chairman, Ben S. Bernanke, a student of Japan’s deflation, said in July. “The evidence is that falling and low inflation can be very bad for an economy.”

There is evidence that low inflation is hurting the American economy.

“I’ve always said that a little inflation is good,” Richard A. Galanti, Costco’s chief financial officer, said in December 2008. He explained that the retailer is generally able to expand its profit margins and its sales when prices are rising. This month, Mr. Galanti told analysts that sluggish inflation was one reason the company had reported its slowest revenue growth since the recession.

Executives at Walmart, Rent-A-Center and Spartan Stores, a Michigan grocery chain, have similarly bemoaned the lack of inflation in recent months.

Many households also have reason to miss higher inflation. Historically, higher prices have led to higher wages, allowing borrowers to repay fixed debts like mortgage loans more easily. Over the five years before 2008, inflation raised prices 10 percent. Over the last five years, prices rose 8 percent. At the current pace, prices would rise 6 percent over the next five years.

“Let me just remind everyone that inflation falling below our target of 2 percent is costly,” Charles L. Evans, the president of the Federal Reserve Bank of Chicago, said in a speech in Madison, Wis., this month. “If inflation is lower than expected, then debt financing is more burdensome than borrowers expected. Problems of debt overhang become that much worse for the economy.”

Inflation also helps workers find jobs, according. to an influential 1996 paper by the economist George Akerlof and two co-authors. Rising prices allows companies to increase profit margins quietly, by not raising wages, which in turn makes it profitable for companies to hire additional workers. Lower rates of inflation have the opposite effect, making it harder to find work.

Companies could cut wages, of course. But there is ample evidence that even during economic downturns, companies are reluctant to do so. Federal data show a large spike since the recession in the share of workers reporting no change in wages, but a much smaller increase in workers reporting wage cuts, according to an analysis by the Federal Reserve Bank of San Francisco. There is, in practice, an invisible wall preventing pay cuts. The standard explanation is that employers fear that workers will be angry and therefore less productive.

“I want to be really careful about advocating for lower wages because I typically advocate for the other side of that equation,” said Jared Bernstein, a fellow at the left-leaning Center on Budget and Policy Priorities and a former economic adviser to Vice President Joseph R. Biden Jr. “But I think higher inflation would help.”

The Anchorage school board, facing pressure to cut costs because of a budget shortfall, began contract negotiations with its 3,500 teachers this year by proposing to freeze rather than cut wages. The final deal, completed last month, gives the teachers raises of 1 percent in each of the next three years.

Teachers, while not thrilled, described the deal as better than a pay cut. But it is likely, in effect, to cut the teachers’ pay. Economists expect prices to rise about 2 percent a year over the next three years, so even as the teachers take home more dollars, those dollars would have less value. Instead of a 1 percent annual increase, the teachers would fall behind by 1 percent a year.

“We feel like this contract still allows us to attract and retain quality educators,” said Ed Graff, the Anchorage school district superintendent.

In June, Caterpillar, the industrial equipment maker, persuaded several hundred workers at a Wisconsin factory to accept a six-year wage freeze. The company described the workers as overpaid, but it did not seek direct cuts.

The slow pace of inflation, however, minimizes the benefits. Seeking further savings, Caterpillar has since laid off almost half of the workers.


Don't you all see? We need official inflation of 6% (in real life, this will equal 15%) sustained, at a time of stagnant or declining real wages (IOW, deflation in wages) and massive unemployment/underemployment...

....This high inflation brought about by MOAR FED MONETIZATION OF MOAR DEFICIT SPENDING will cure all our ailments - just ask Japan.

Even if this theory of MOAR inflation = good was true, let's analyse the open advocacy of what the proponents of this are TRULY saying, which is actually MOAR WAGE DEFLATION GOOD;

"Inflation also helps workers find jobs, according to an influential 1996 paper by the economist George Akerlof and two co-authors. Rising prices allows companies to increase profit margins quietly, by not raising wages, which in turn makes it profitable for companies to hire additional workers. Lower rates of inflation have the opposite effect, making it harder to find work."

McWages FOR ALL!

schoolsout's picture

This isn't new news...this was talked about many months ago.  Surprised everyone forgot about it.  Many of the states that were not participating in the exchanges cited this rule as to why they aren't. 

MeMadMax's picture

"Obama administration has no hope of repairing the glitch"

BS, Ochooma will find a way, even if he has to send in a Army of secret service/IRS/SWAT/whatever agents to enforce it...


Wave Maker's picture

This really is a problem for Obama.  The law defines state exchanges in a different section than federally facilitated exchanges.  It says that tax credits will be made available through exchanges created under section 1311, but federally facilitated exchanges are created under section 1321.  This was done as a hammer to induce states to set up the exchanges, but at the time, nobody dreamed the Supreme Court would make expanding Medicaid optional for states. 

I disagree that the courts will automatically disregard the wording of the law.  It is very clear.

MisterMousePotato's picture

The law is also very clear in California, for instance, on securitization of promissory notes via deeds of trusts, and the procedures that need to be followed in order to perfect that security interest (like all other jurisdictions).

The courts have, thus far, automatically disregarded the wording of the law.

You're even more naive than me (and Brother, that's saying a lot) if you think the courts will follow the plain, black letter language of the statutes or precedent if doing so is going to affect their pensions, which it will. Boy, will it ever.

GetZeeGold's picture





I would just like to ask.....what the hell is up with all the damn SWAT teams? Do we really need a SWAT team for the damn Boy Scouts?


Could we please send these SWAT teams down to the border where we could actually use them?

Running On Bingo Fuel's picture

"rising wages help borrowers repay debts."

Problem is Biny, wages aren't rising and jobs are disappearing.

TruthInSunshine's picture

Not that I or MANY of US aren't already convinced, but it's the illogic & basic, inherent contradictions in rational thought/analysis in articles such as this by Lame Stream Financial Media Outlets that will hopefully wake up more present day sheeple to the fact that it's Bastille Day Redux or permanent debt servitude.

Offthebeach's picture

Jant Reno is bring put in charge of enforcement.
You buy/get with the program, or else a SWAT team dynamic entry's your ass.
The health of Obamacare, the tax flow is too important for the health of FedGov.
Your health, not so much.
I would imagine if you have kids and don't participate, that it is child endangerment and they can taken from you after a dog killing raid.
Maybe some of us can be shipped on trains out to the Dakotas to New Model Obama Economic Zones.
Kids will be kept near capitals in shelters run by pervs, funded by perv pols.

MisterMousePotato's picture

Unlike many others, your shortcomings in  English proficiency are no hindrance.

Lost Word's picture

More blackmail of the Supreme Court in order to overturn the rule of law and the Constitution, just as Obamacare was originally decreed "constitutional", and everything else Unconstitutional Fraud Obama has done.

chemystical's picture

The core of the problem (and frankly that of most problems of any import that the USSA faces) can be discerned by a review of the persons named in the news item:

Ben Bernanke, Binyamin Applebaum, Janet Yellen, Kenneth Rogoff, Alan Greenspan, George Akerlof, Jared Bernstien.

Let the ad hominems fly.  You have a better chance of winning the lottery twice in one day, then being struck by lightning, then attacked by killer bees, then attacked by a shark, then being killed by terrorists, than for the kohencidence of co-religionists at the center of problems: orchestrating, benefiting from, 'debating' both 'sides' in the occupied media, offering solutions for, ad fucking nauseum.  matter of time till everyone else wakes up.

<blinders off>

trader1's picture

thank you.  

a few days ago, i made the same comments (albeit harshly) with data and multiple sources to back it up.

 why the hell did i get junked into oblivion?  

ZH commenters are bipolar.


trader1's picture

how cute, two junks so far.  i've attracted a hater fan base ;-)

must be a bot,

or some of you east coast playas' first thing to do is visit the ZH comments section between 5-6am on a sunday morning,  

or we have some late night west-side playas with nothing better to do than junk and run the ZH board.  

lunaticfringe's picture

If you want to whine, there is always Huffpo.

trader1's picture

not whining.

just excited that i've attracted a fan club.  

operation mindfuck continues ;-)

flyme's picture

You are aware that those tax rebates are only paid to those who are working - have paid tax / have taxable income - and filed a return. Many of the poor, or those who live on nontaxable income  file no tax return, since they have no taxable income. Therefore neither will not qualify for any insurance rebate. Many will be ineligible for this rebate, just as they were/ are ineligible for earned income tax credit.

object_orient's picture

Not true. You don't have to file a tax return to get subsidized health insurance. However, if you don't buy any and don't file a return, the IRS will have a hard time collecting the fine.

rbg81's picture

Guess someone forgot to read the law to find out what was in it before they passed it--eh?

That being said, Obama will just issue an Executive order to do whatever he wants.  If a court shoots him down, the ruling will be ignored 'cause it MUST be racist.

Balanced Integer's picture

Andrew Jackson ignored the Supreme Court's ruling to stop the Cherokee removals. Guess Obama has some precedent of his own to go by, ironic as that would be.

TBT or not TBT's picture

Ah the storied history of populist politicians crimes against humanity.