Challenging the Calculator: The Capricious Bug in the Affordable Care Act

By: Chris Kozak

The Affordable Care Act is probably the most controversial piece of legislation since the Civil Rights Act. To date, the Act's mandates have been challenged mainly on substantive grounds.[1] By rebuffing most of these challenges, the Court has signaled it is done ruling on the Act's substance. However, opponents of the Act have overlooked a potentially fatal weakness in the Act's design:

It is a nightmare from the depths of Administrative Law hell.

Professor Seth Chandler, in his article Regulation by Calculator,[2] unearthed a striking set of facts that could be used to bring the Act to a grinding halt. The Act relies on a so-called “actuarial value calculator,” a pre-programmed Excel spreadsheet that allows insurers to input over 200 plan variables. The calculator then uses embedded coding to decide if the plan is legal—and if it is, how valuable it is to purchasers.

If done properly, this is an ingenious way for the government to conduct large-scale regulation. Instead of holding individual adjudications to determine a plan's viability, an insurer can download the spreadsheet, pop in its proposed data, and get an answer. The calculator's substantive decisions may then receive Chevron-style deference if an insurer dislikes the result. This sort of deference is desirable if the efficiency of “regulation by calculator” is to be preserved, and the courts would probably be willing to grant it.

The problem? No one knows how the calculator works. The code underlying the calculator and its origins are opaque and poorly documented. Even worse, there seems to be no meaningful way to test the calculator against itself. Professor Chandler identified multiple internal inconsistencies within the calculator's code indicating that either (a) the data underlying the code is incorrect, or (b) the documentation describing the code is flawed. As he concludes, “Neither alternative is particularly comforting.”[3] 

An unflinching axiom of Administrative Law is that agencies must explain the rules they issue. As the Supreme Court has famously said, an agency must "articulate a satisfactory explanation for its action, including ‘a rational connection between the facts found and the choice made.”’[4] Anything less is arbitrary, capricious, and unlawful.  Moreover, an agency that decides similar cases differently is equally guilty of caprice, since inconsistency is the hallmark of bad logic (and bad coding).[5] These principles are rooted in the reasons we are even comfortable with having agencies in a democracy: If we force them to be transparent, we can root out deceit, incompetence, and corruption.   

All this lays the groundwork for a claim by an insurer that the spreadsheet is arbitrary and capricious under APA § 706(2)(A). If the Center for Medicare and Medicaid Services (CMS) is using a spreadsheet with opaque and inconsistent coding to decide which plans are lawful, then the spreadsheet loses both our trust and its legal force. Although a favorable ruling from the courts would simply remand the spreadsheet to CMS, the case could serve as the tip of the political spear for those who want to kill the Act. It is beyond doubt that humans can create reliable code to govern insurance plans. This case, however, would create a question about whether it can be done on a national scale with a public budget. Future failures by CMS to produce consistent coding and reliable documentation[6] may convince the median voter that the “invisible hand”—with all its externalities and vices—is the only beast capable of producing the capital necessary to sustain regulation by calculator.


[1] Zubik v. Burwell, 136 S. Ct. 1557, 1559 (2016),; Julie Rovner, As Supreme Court Sends Back Birth Control Case, Both Sides Claim Victory,, (May 16, 2016, 3:55pm), 478262940/supreme-court-sends-obamacare-birth-control-case-back-to-lower-courts; King v. Burwell, 135 S. Ct. 2480 (2015),; Nat'l Fed'n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2585, 2593 (2012), available at opinions/11pdf/11-393c3a2.pdf.

[2] Seth J. Chandler, Regulation by Calculator: Experience Under the Affordable Care Act, 2016 Mich. St. L. Rev. 465.

[3] Chandler, supra note 2, at 479-87.

[4] Motor Vehicles Mfg. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983), https://supreme.

[5] See, e.g., FCC v. Fox Television Stations, Inc., 556 U.S. 502, 535-36 (2009) (Kennedy, J., concurring in part and in the judgment),

[6] This is not beyond the realm of possibility. In 2013, a graduate student published a paper demonstrating that an influential economic study on austerity—written by two Harvard Professors—was seriously flawed because of a simple coding error. Chandler, supra note 2, at 484 n.59.

The Endless Waltz: Article III Standing and Environmental Conflicts

By: David Sheaffer

Few areas of the law grapple with the constitutional limitations of our judiciary as often as disputes over pollution and environmental regulation. In fact, environmental litigants and the standing doctrine have paired off in an endless waltz for well over a century. It comes as little surprise that some of the most interesting and groundbreaking decisions to shape the limits of Article III standing have been, and continue to be, environmental conflicts.

The Supreme Court’s decision in Massachusetts v. EPA, 549 U.S. 497, 127 S. Ct. 1438 (2007), arguably lowered the standing requirements for quasi-sovereign plaintiffs. The fundamental elements of standing remain unchanged: 1) actual or imminent injury, (2) a traceable causation, and (3) redressability. But, following Massachusetts, scholars and practitioners alike have speculated whether the relaxed requirements in that case would carry through to private parties. In his 2012 article, Standing for Private Parties in Global Warming Cases: Traceable Causation Does Not Require Proximate Causation, 2012 Mich. St. L. Rev. 869 (2012), Professor Bradford C. Mank argued that in a post Massachusetts world, proof of proximate causation is an unnecessarily high hurdle to achieve standing in climate change suits.

Professor Mank critically analyzed the Massachusetts opinion, as well as other significant climate change cases following in its wake. He logically asserted that whether plaintiffs have standing should be addressed before, and separately from, the merits of the dispute. Further, the constitutional requirement of a traceable causal link is best understood as a lesser burden than traditional proximate causation. He opined that applying a less restrictive standard for causation would still preclude duplicative or improbable suits, while allowing easier access to the courts for private parties alleging individualized damages caused by greenhouse gas emissions.

To date, courts have been far from consistent in their interpretation of Massachusetts’ standing language, and even less consistent in adopting the relaxed standard advocated for by Professor Mank. For example, the Ninth Circuit in Washington Environmental Council v. Bellon, 732 F.3d 1131 (9th Cir. 2013), granted summary disposition in favor of the state defendants concluding the special solace granted in Massachusetts did not extend to private parties. Thus, the evidence was insufficient to satisfy the standing trinity.

It is noteworthy that the Bellon court did not dispute the gravity or existence of the alleged injuries, but nevertheless, the plaintiffs could not paint a traceable causal link to the court’s satisfaction. Specifically, the court held that the plaintiffs offered mere “vague, conclusory statements that the Agencies’ failure to set [Reasonably Available Control Technology] standards” under the Clean Air Act contributed to private emissions, and thus contributed to climate change causing the alleged injuries. Id. at 1142. The injury was accepted as pled, the emissions undeniably present, and the absence of regulation undisputed, but causation was still too attenuated. Thus, while acknowledging the near insurmountable burden placed on plaintiffs in a climate change action, the court dismissed the case for lack of standing.

However, arriving at the court on a motion to dismiss this year, an Oregon magistrate judge found standing for a group of private citizens and denied a motion to dismiss despite the generalized nature of their injury and a tenuous causal chain. Juliana v. United States, No. 6:15-cv-1517-TC, 2016 U.S. Dist. LEXIS 52940 (D. Or. Apr. 8, 2016) (Coffin, Mag. J. recommendation). As advocated by Professor Mank, standing in this case was analyzing at the early stage of dismissal and without wading into the merits of the claims. Despite the undeniable necessity of numerous third party actions, the court found it “sufficient that [the] EPA's action/inaction with respect to the regulation of greenhouse gases allegedly results in the numerous instances of emissions that purportedly cause or will cause the plaintiffs harm.” *19. As such, the generalized pleadings were more than sufficient to paint a traceable causal link.

One possible explanation for the disparate treatment may be that the Juliana injury was framed as constitutional as opposed to procedural like in Bellon. Alternatively, the court may be embracing the liberal interpretation of Massachusetts and the traceable causation element articulated by Professor Mank. Whatever action the District Court decides to take with regard to this motion, the case will almost certainly appear on the docket of the Ninth Circuit. As climate degradation cases continue to rise, standing jurisprudence in the realm of environmental litigation will continue to evolve. But, whatever the result in this case, environmental and constitutional law are likely to dance side by side before our courts long into the future.



Moving at the Speed of Business: Lex Machina, Data, and Dedicated Business Courts

The business world changes rapidly, and if lawyers want to stay above water, they must change rapidly too. Unfortunately, some lawyers are trying to make their horses faster, when they really need to be building cars. Jay Lonick described the advent of business courts in Michigan and the importance of lawyers fully engaging in a changing legal market. Specifically, he described the purpose of the business courts and their impact in a market that now asks for data-supported legal conclusions. In this post, I intend to expand on those ideas by advocating for improvements to a new, though quite powerful, analytical tool: Lex Machina.

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“If I Had Asked People What They Wanted, They Would Have Said Faster Horses”: Specialty Courts & Hope for Innovative Attorneys

Doubts and speculation about the viability of investing in a legal education have led to significant improvements in efficiency and profitability. One shift has been the pressure for lawyers to specialize in fields of practice to encourage expertise and more predictable client outcomes. Lawyers should recognize this trend by supporting the specialization of the places where lawyers do business: the courts. My purpose in this post is to use Michigan’s specialized business courts as an example of how soon-to-be attorneys can benefit from innovation aimed at the judiciary. In part two of this post, Clint Westbrook provides an example of private-sector change in the legal marketplace to show how the trend toward using data, lean thinking, and predictive legal practice is already underway.

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Paul Hadley’s Watercolors: Orphan Works or Not?

For most artistic works, cultural institutions only own the physical copy of the work, not the intellectual property rights. Finding these copyright holders can be a formidable task, especially when the search falls short and the copyright owner cannot be located, as in the case of Paul Hadley. Works like Hadley’s are commonly referred to as orphan works. Orphan works are copyrighted works where the copyright owner is impossible to find, contact, or even identify. Current copyright law does not address what should or could be done with orphan works.

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Financing a Judicial Election: A Candidate’s Right to Free Speech

By: Katie Sieber

This coming week, the Supreme Court will hear arguments on whether the First Amendment permits states to prohibit judicial candidates from directly soliciting campaign funds. States are divided over whether a candidate for judicial office is permitted to solicit campaign funds directly. Currently over half of the states that have some form of judicial elections have adopted the American Bar Association’s Model Rule that prohibits candidates from soliciting campaign contributions. Because thirty-nine of the states have some elections for the judiciary, the Supreme Court’s ruling in this case will have a significant effect on judicial candidates across the country. The current ABA Model Rule’s prohibition inhibits a candidate’s ability to gain name recognition through campaigning for funds, impairs the candidate’s ability to raise funds, and makes it more difficult for the candidate to run a successful campaign.

The Supreme Court has expanded the First Amendment protections to judicial candidates in the past. In 2002, in Republican Party of Minnesota v. White, the Supreme Court ruled that those seeking judicial election are permitted to discuss their views on the issues about disputed legal and political topics under the First Amendment. The rules governing judicial elections vary from state to state, but many have rules that prohibit judges from engaging in any partisan political activity. States have gone as far as to prohibit those seeking judicial office from discussing their views on any issues that might come before the court.

The Minnesota rules for judicial election prior to this ruling prohibited a person running for judicial office to state her views on issues that were likely to come before the court. In 1996, Greg Wersal ran for Minnesota Supreme Court. He distributed literature criticizing several Minnesota Supreme Court decisions on issues including crime, welfare, and abortion. He stated that he was against judicial activism, but was limited in what he could say during his campaign by Minnesota’s Canon 5, or the “announce clause.” This clause stated that a candidate could not announce his or her views on a contested legal issue or a political issue. In 1998, the Minnesota Supreme Court modified the clause making it unethical for any candidate for political office to seek or accept endorsements from political parties. Wersal challenged these canons arguing that they were unconstitutional. The Supreme Court ruled that candidates are allowed to give their opinions about legal and political issues.

The case currently before the Supreme Court is Williams-Yulee v. Florida Bar, which arose in a Florida judicial election. Lanell Williams-Yulee ran for County Court Judge in Hillsborough County, Florida. During the course of her campaign, she signed a campaign-fundraising letter in which she personally solicited campaign contributions from supporters. At the time that Williams-Yulee signed the letter, she was running unopposed in the election and did not believe that the rule prohibiting the conduct applied to her. She was later disciplined by the Florida Bar and required to pay costs of the proceedings. She challenged the ruling arguing that she did not believe the rule applied to her because there was no other judicial candidate running against her at the time.

The Florida Supreme Court affirmed the discipline by the Florida Bar and stated that it recognized that by prohibiting judicial candidates from personally soliciting campaign contributions, Canon 7C(1) restricts a judicial candidate’s speech. Because of this, the rule must be narrowly tailored to serve a compelling state interest. The Court ruled that Florida has a compelling state interest in preserving the integrity of its judiciary and maintaining the public’s confidence in an impartial judiciary.

A ruling in favor of Williams-Yulee could mean that candidates for judicial office have greater ability to raise funds and increase their name recognition with the public. For all those candidates running against an incumbent, this will likely increase their exposure with voters, potentially gaining them additional votes. Regardless of the Supreme Court’s decision in this case, the ruling will have a significant effect on judicial candidates across the country.

Federal Judge Allows Oklahoma to Ring in the New Year with a Three-Part Lethal Injection Cocktail

Oklahoma’s lethal-injection troubles came to a head on April 29, 2014, when inmate Clayton Lockett was executed by means of a three-part lethal injection cocktail. The three-part lethal injection cocktail was adopted after Oklahoma lost access to traditional lethal injection drugs. The supply was limited due to European distributors placing bans on the drugs in an effort to take a stand against the death penalty.

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The TNC (Ride-Sharing) Insurance Gap

Ride-sharing application companies, now designated as Transportation Network Companies (TNCs), are organizations that maintain a smartphone application that prearranges trips between consumers and drivers while logged into the TNCs’ apps. TNCs are a platform through which drivers, using their personal vehicles, can accept money to drive consumers. As personal auto insurance generally has a livery exclusion for drivers accepting money, personal auto insurers are likely to reject a claim made while using a TNC. If personal auto policies were required to cover any type of commercial liability, it is likely that the cost of personal auto policies would increase.

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Vanity License Plates Stir Up Free Speech Issues

Driving is a great and widespread privilege in American society. Most American children eagerly look forward to their sixteenth birthday, upon which they may finally enjoy the freedom of unsupervised operation of a motor vehicle. One subject that many Americans may not often consider a serious topic in relation to cars is the license plate. However, the specialty, or vanity, license plate is sparking controversy across the country.

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The Supreme Court vs. Obamacare: Round 2

During the Supreme Court’s next term, the fate of the Affordable Care Act (ACA) will once again be decided. In November, the Court agreed to hear a lawsuit targeting the federal subsidies that millions of Americans rely on to purchase health insurance. While the Obama Administration contends that these subsidies are essential to making health insurance more affordable to low- and middle-income families, the challengers argue that the administration’s interpretation contravenes the plain language the law sets forth.

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Is Social Security Really just the World’s Largest Ponzi Scheme?

Franklin Delano Roosevelt signed the Social Security Act in 1935. The modern Social Security program pays retirement benefits to qualifying retirees. The FICA tax income collected from current workers’ paychecks supports the payment of the benefits to the retirees. . . . Aha! Didn’t Bernie Madoff get in trouble in 2009 for a similar investment scheme where he recruited new investors in order to pay old investors? Yes, and no. Bernie Madoff did plead guilty to operating a Ponzi scheme with over $50 billion in investments from thousands of investors. However, the Social Security program is not by definition a Ponzi scheme.

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Can Ski Resorts Exclude Snowboarding? Federal Court Says “Yes”

All is not well in Utah’s snowy, white slopes. Disgruntled snowboarders chose to file a federal lawsuit challenging Alta Ski Resort’s long-standing policy of allowing the resort’s customers to use skis but not snowboards. Alta is one of 120 ski resorts that operate on U.S. Forest Service lands, and the only one that limits customers to skiing.

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