Supreme Court Obamacare Litigation Part III

November 7, 2014 Updated: April 23, 2016

The Supreme Court on Friday agreed to hear yet another challenge to the Affordable Care Act (ACA or Obamacare).  This time, the case challenges the IRS’s interpretation of the statute, which allows individuals to enjoy subsidies in health care purchased through the federal exchange if their state chose not to establish healthcare exchanges.  Challengers of the law claim that the IRS interpretation runs opposite to the language of the statute, which states that such subsidies are derived from exchanges “established by the State.”

The case the Supreme Court agreed to hear, King v. Burwell, comes from the Fourth Circuit and was argued this summer in Virginia.  The circuit court ruled in favor of the government saying, in part, that the statute’s language was ambiguous and therefore afforded deference to the agency, in this case the IRS.  The circuit court also based their decision on the fact that it would be unfathomable for Congress in constructing the statute, to design such a flaw.  However, opponents of the law point to the relevant language of the statue as bullying states into establishing their own exchanges so their citizens could receive subsidies.  Bullying the states would ensure states established the exchanges or face backlash for holding affordable health care from their constituents for political spite.

Earlier on the same day the King decision was handed down, another circuit court in the District of Columbia delivered a decision in Halbig v. Burwell (which challenged the same portion of the ACA) in favor of the challengers – directly opposite that of King.  However, the DC circuit voted to hear the decision en banc or in front of all the judges of the circuit, thus, for now, eliminating the circuit split – a keystone in Supreme Court intervention.  After the much anticipated DC circuit decided to hear Halbig en banc, it appears that decision, which was poised to be in the affirmative for the government nullifying a circuit split, will be meaningless.

On its face, and in the name of pure common sense, King should be a no brainer – a federal exchange is not a state exchange and therefore should not be given the subsidies, which means millions of individuals are poised to lose them.  But, the legal framework does not always follow common sense.  In the Fourth Circuit’s majority opinion, Judge Gregory, points to the IRS rule promulgation, which stated, “Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges. Accordingly, the final regulations maintain the rule in the proposed regulations because it is consistent with the language, purpose, and structure of section 36B and the Affordable Care Act as a whole.”

However, the challengers oppose the law on libertarian-type principles in which the government is forcing them to purchase something they do not want or face a financial penalty – virtually the root of the previous two challenges to the controversial law.  Here is Judge Gregory more specifically describing the challenge:

“The plaintiffs in this case are Virginia residents who do not want to purchase comprehensive health insurance. Virginia has declined to establish a state-run Exchange and is therefore served by the prominent federally-facilitated Exchange known as Without the premium tax credits, the plaintiffs would be exempt from the individual mandate under the unaffordability exemption. With the credits, however, the reduced costs of the policies available to the plaintiffs subject them to the minimum coverage penalty. According to the plaintiffs, then, as a result of the IRS Rule, they will incur some financial cost because they will be forced either to purchase insurance or pay the individual mandate penalty.”

With the Court deciding to hear the challenge to the ACA in King, there are two things of which to be mindful.  First, recent Supreme Court decisions have been generous in what is called the Chevron doctrine or agency deference when a statute is ambiguous.  The Court is usually quick to side with the government and the agency interpretation of the statutes in question.  However, as Nicholas Bagley, Assistant Professor at Michigan Law, wrote on SCOTUSblog following the Court’s decision to hear King, “As I see it, what’s troubling here is not that the Court took King in the absence of a split. Its rules permit it to hear cases involving ‘important question[s] of federal law that ha[ve] not been, but should be, settled by this Court.’ It’s not remotely a stretch to say that King presents one such important question…No, what’s troubling is that four justices apparently think—or at least are inclined to think—that King was wrongly decided. As I’ve said before, there’s no other reason to take King.”

Bagley is first referring to what was alluded to above; the Court usually intervenes if there is a circuit split, of now there is not regarding this challenge (proponents of same-sex marriage will doubtless be concerned that Court decided to take King without a split and declined to take one of seven cases challenging same-sex marriage bans in various states, despite no circuit split.  However, as of yesterday, there is now a circuit split and the Court will likely have to intervene – probably next term.)  Second, Bagley is concerned that at least four justices, the amount it takes to affirm to hear a particular case, wanted to hear King, which logically means four justices believe the lower court erred when ruling in favor of the government.  That means, potentially, only one other justice is needed to invalidate the subsidies. 

In a separate post on SCOTUSblog today, and in reference to what was also alluded to earlier regarding Chevron doctrine and agency deference, Abbe R. Gluck, Professor of Law at Yale Law School, wrote, “Justice Scalia, an ardent proponent of judges not engaging in ‘legislation’ under the guise of interpretation, has argued that the Court’s role is to adopt the interpretation that ‘does least violence to the text’…The IRS’s interpretation accomplishes that goal: Section 1401 can still be read literally because the section that authorizes the federal exchanges, Section 1321, provides that if a state does not establish an exchange under Section 1311, the Department of Health and Human Services (HHS) ‘shall . . . establish and operate such Exchange within the State.'”  Gluck’s comments point to justices who are skeptical about judicially re-writing statues and thus afford deference to agency’s within reason – an apparent bright spot for proponents of the ACA. 

As with any Supreme Court issue, trying to read tea leaves is a fool’s errand but Court watchers love to do it anyway.  The justices and litigants will be scrupulously examining every little word and their meaning and applicability to this case to see if, in fact, words really are what they mean or a seemingly straightforward phrase is ambiguous. In another interesting turn, the government has asked the Court to hear oral arguments in King this term because the longer a decision is put off, the harder it will be to strip benefits and subsidies that have become entrenched – also the reasoning behind petitioner’s request to the Court.  Here’s to more drama at the Supreme Court in June!