This week, the Supreme Court heard the case King v. Burwell, conservatives’ latest challenge to the Affordable Care Act, also known as Obamacare. At issue is the availability of tax subsidies for people who purchase health insurance on a marketplace created by the federal government. The Petitioners – the people bringing the lawsuit – are attempting to send the Affordable Care Act spinning into a death spiral, by arguing that the subsidies are not available to people who buy their health insurance on the federal exchange, because the law states that the subsidies are only available to people who buy their insurance on an exchange “established by the State.” Now, you might recall that many states chose not to develop their own exchanges. Instead, people in those states purchase their insurance on the federal exchange. As such, the U.S. government (the Respondent) has countered by arguing that because the federal government stands in the shoes of the states that choose not to establish their own exchanges, the subsidies are available to everyone. The stakes are high.
But here comes the irony. The Petitioners further argue that Congress wrote the law this way to force the states into establishing their own exchanges if they wanted the subsidies, and to force them into assuming responsibility for the fallout if they failed to do so. It is this argument that sets up the ironic conundrum conservatives have just fallen trap to.
The conundrum starts with the principle of federalism. Federalism in the United States is the constitutional relationship between U.S. state governments and the federal government of the United States. It is the idea that there is a separation of power, a power sharing if you will, between the states and the federal government. And, if I’m not mistaken, it is generally something that conservatives scream and yell about when they invoke “states’ rights” and Tenth Amendment arguments.
Now, on many occasions the Supreme Court has said that the federal government can incentivize the states into doing something using money (like they do with the drinking age – yes, they offer states extra $$$ to keep the drinking age 21, but that’s another story for another day), but the Court has also said that the federal government cannot commandeer the states into doing something by requiring the states to “take title” aka assume liability for the fallout if they fail to comply with a federal directive. (See New York v. U.S.) In fact, in that case, the Supreme Court held that this type of “you take responsibility” provision was impermissibly coercive and violated the Tenth Amendment.
In simple terms, conservatives are now arguing in favor of an interpretation of the Affordable Care Act that would potentially violate federalism and the Tenth Amendment. How’s that for irony?
If the Court were to adopt the Petitioners’ position (the people trying to kill the law) it could create a huge constitutional problem. Their entire argument against Obamacare is that the federal government used the words “established by the state” in order to coerce the states into setting up exchanges if they wanted the federal money. If this argument were adopted, it would lead to the logical legal conclusion that the federal government is attempting to commandeer the states into setting up exchanges by threatening to withhold their subsidies and therefore would arguably violate the anti-commandeering principle, the principle of federalism, and the constitution. They really didn’t think this all the way through. Even Justice Kennedy – a key vote in this case – called it a “serious constitutional problem” during oral arguments (source).
Notwithstanding, there are actually several other legal doctrines at play here.
1) Standing: The Petitioners have actually benefited from the subsidies. In order to have standing, the petitioners have to be able to prove they are injured by the fact that states without their own exchanges receive subsidies. So the preliminary question is, because the petitioners are benefiting from the subsidies, can they show a cognizable injury such that they would have standing?
2) Constitutional Avoidance: Under this doctrine, the Court is more apt to read laws in a way that avoid further constitution problems. So, the second question is, if the Petitioners’ argument was to be adopted, would it actually create further constitutional problems? As discussed above, that seems likely. It would create the commandeering problem and violate the principle of federalism.
3) Chevron Deference: Pursuant to Chevron v. NRDC, the Court usually defers to the agency in charge of executing the provision when determining what the provisions means. Therefore, if the IRS interprets the words, “established by the state” as meaning the exchanges established by the states themselves (like in NY) and the “exchanges” established by the federal government, while standing in the states shoes, then the subsidies should be available regardless of whether an exchange is established by a state government or the federal government (the IRS has interpreted the law this way). So, the third question is, does Chevron apply? And if it does, then must the Court defer to the IRS interpretation, which says that subsidies are available regardless of whether you bought your insurance through a state exchange or the federal one?
4) Plain Language Interpretation v. 5) Context Interpretation:
These are competing principles. Some justices say we should only look at the words themselves, other justices say we have to look at the words in context of the entire law. So on one hand, you have what the law actually says, “established by the state,” which would militate in favor of the Petitioners’ argument. On the other hand, if you look at the statute as a whole, it is pretty clear that Congress intended the subsidies to flow to anyone who bought insurance on any exchange – this would militate against the Petitioners’ argument. Further, while these two principles compete directly, they also work in tandem with the first three, so you must take them account while looking at how they – a plain language interpretation or a context interpretation – function within the doctrines of standing, avoidance, and Chevron.
With so many doctrines in play, it’s hard to know which way the Court will rule on Obamacare.
All of this over four simple words, and with so much at stake, all of this could have been avoided with proper drafting. The proper wording of the statute should have been, “subsidies are available to anyone who is eligible for them, as long as they buy insurance on an exchange, regardless of whether that exchange is established by a state government or the federal government.”