When Case Western University law professor Jonathan Adler testified before a House subcommittee on July 31, 2013, he had no idea that his analysis of the Patient Protection and Affordable Care Act (ACA) could bring that gigantic piece of legislation to the Supreme Court for yet another review.
Adler told the committee that the language of the ACA gives individual states an option when it comes to setting up health care insurance exchanges—marketplaces where citizens can buy health insurance under the ACA. States could create them, or more importantly, could elect not to create them. In fact, only 16 states chose to establish exchanges while the remaining 34 elected not to. Under the ACA, that means the federal government must establish and operate exchanges in those states which have failed to create them. However, as Adler pointed out, there is a significant difference between the federal and state exchanges. The ACA clearly says that insurance purchasers on exchanges “established by the State” receive generous subsidies (in the form of tax credits that are advanced to them), thus significantly reducing the cost of health insurance. On the other hand, the language of the ACA does not offer subsidies to purchasers on federal exchanges because the language of the statute speaks only of exchanges “established by the State.” This is what Adler pointed out over a year ago to Congress.
The IRS, the administering agency for the ACA, also saw the problem. The IRS solution was to rule that the subsidies could go to purchasers without regard to whether the exchanges were state or federal. That ruling was legally challenged and produced two different federal court decisions. In July, a panel of the D.C. Circuit Court of Appeals ruled (Halbig v. Burwell) that the language of the ACA does, indeed, restrict taxpayer subsidies to state exchanges. Simultaneously, the Fourth Circuit Court of Appeals disagreed, saying that because the language was ambiguous, the federal government could exercise its discretion in interpreting the language (King v. Burwell). That decision, in effect, supported the IRS’ expansive interpretation.
The Supreme Court has agreed to hear King v. Burwell largely because of the gravity of the issue—subsidies for an estimated 5 million people hinge on the outcome as well as other consequences. The key issue is a matter of “statutory construction.” Congress has passed a law, albeit a long and complex one, and in that law there is language which has a plain and unambiguous meaning on its face. The subsidies which reduce the cost of health care insurance for the purchaser are only available for health plans “enrolled in through an Exchange established by the State under section 1311” of the ACA. The federal exchanges are not established by the state. Therefore, plans purchased on those exchanges do not qualify for the subsidies.
The government argues otherwise, citing other provisions of the ACA, legislative history, and the broad purposes of the ACA. Both appellate courts—the D.C. Circuit and the Fourth Circuit—have considered these arguments.
The Fourth Circuit opinion concludes that the subsidy statute in question “is ambiguous and subject to at least two different interpretations.” The court’s solution is to defer to the IRS, asking only whether the IRS interpretation is reasonable. The opinion finds it to be reasonable because that interpretation “advances the broad policy goals of the Act.” As partial proof, the court offered the heading of Title I of the ACA, which reads, “Quality, Affordable Health Care for all Americans.” This means that the Fourth Circuit opinion is reduced to relying upon the claim of universal coverage in a heading, while rejecting the clear language of a provision of the act itself! This is certainly a stretch, since the heading of a statute is generally viewed as the weakest kind of proof of legislative intent, if it is considered at all.
The D.C. Circuit opinion covers the same ground, but concludes that when Congress provided tax credit subsidies for persons who had purchased health insurance plans on state exchanges, that is precisely what it meant to do. The opinion exudes judicial restraint: “We do not disregard statutory text lightly. The Constitution assigns the legislative power to Congress and to Congress alone … and legislating often entails compromises that courts must respect.” Citing the Chevron case, the court says that “when the words of the statute are unambiguous … judicial inquiry is complete.”
Though the government argued that a literal interpretation created an “absurd” result, the opinion writer, Judge Thomas Griffith, responded that such an interpretation of the statute “does not render other provisions of the ACA unworkable, let alone so unreasonable as to justify disregarding … plain meaning.”
The government also attempted to invoke legislative history to support the broader availability of subsidies, but the D.C. Circuit saw no evidence that such a history was at odds with the plain meaning of the actual subsidy portion of the ACA. Though the court does not say so, what may have happened here is that the drafters of the ACA did not anticipate that the states would be so uncooperative in establishing exchanges, even if it meant risking the loss of subsidies for their citizens. Perhaps the ACA writers thought the subsidy carrot would be enough.
The matter is now left to the Supreme Court. This case is greater than the practical survival of Obamacare. It is a case about the separation of powers. If Congress passes a law, can an administrative department, aided by the courts, work its effective amendment? The answer given by the court should be a resounding: No.