March 9, 2015
Justice Antonin Scalia provided the most memorable bon mot from last week’s oral arguments in King v. Burwell — the latest and most important Supreme Court challenge to Obamacare since 2012. “How can the federal government establish a state exchange?” he asked Solicitor General Donald B. Verrilli, Jr. “That’s gobbledygook.”
Scalia’s question strikes at the heart of the case. In order to rescue the Affordable Care Act, Verrilli needs the Supreme Court to disregard the plain text of the law — not to mention the Constitution itself. That’s not an argument the Supreme Court should buy.
The high court is considering a section of the ACA authorizing tax credits for those who purchase health insurance from “an Exchange established by the State.” A majority of states — 37 to be exact — have failed to establish their own exchanges. So the federal government has built one on their behalf — the infamous HealthCare.gov.
The administration instructed the Internal Revenue Service to extend tax credits to federal-exchange customers as well. Never mind that the agency lacked the authority to award “premium assistance credits” to HealthCare.gov’s enrollees. The federal marketplaces weren’t in any sense “established by the State.” These subsidies, therefore, are illegal.
That was the judgment of a three-judge panel of the U.S. Court of Appeals for the D.C. Circuit last summer, as well as a U.S. district court in Oklahoma. The Fourth Circuit Court of Appeals‘ three-judge panel, meanwhile, ruled in favor of the government in a similar case.
Now it’s up to the U.S. Supreme Court to decide the matter.
Last week’s arguments demonstrated just how difficult it will be for the Obama Administration to insist that the phrase “established by the State” doesn’t mean exactly that.
Justice Samuel Alito put the issue simply. “If Congress meant to empower federal exchanges to grant tax credits,” he asked Verrilli, “why did it use the phrase ‘established by the State,’ rather than ‘established under the Act,’ or ‘established within the State?’ Why not say that a federally-facilitated exchange is a state exchange?”
Justice Kennedy took issue with the government’s use of Chevron v. NRDC, a 1984 case that gives agencies like the IRS some flexibility in interpreting “ambiguous” laws. As he saw it, the ACA’s text wasn’t ambiguous enough to warrant the so-called Chevron deference. Such deference would cede a significant amount of authority to the IRS.
“If it’s ambiguous,” Kennedy explained, “then we think about Chevron. But it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars of subsidies involved here?”
Justice Kennedy also raised a constitutional question — whether Obamacare’s effort to entice states to build their own exchanges amounts to “coercion.”
Developed by Yale Law professor Abbe Gluck, this theory starts with the unquestioned fact that Obamacare’s mandates are prohibitively expensive without subsidies. Without them, states’ insurance marketplaces would enter a “death spiral,” where premiums keep rising but don’t cover claims, as consumers increasingly opt not to purchase ever-more expensive insurance.
According to Gluck and company, to see the subsidies as merely an incentive is to see the government as threatening the states — take the subsidies or watch your insurance marketplace crumble. Such a threat would undermine the constitutional principle of federalism.
The high court raised a similar question in NFIB v. Sebelius, a 2012 case weighing whether Obamacare could force states to expand Medicaid. The law tried to take away all federal Medicaid funding from states that refused to boost enrollment in the program. The Supremes struck that move down.
Justice Sonya Sotomayor pointed to the consequences of ruling against the federal subsidies, which roughly 7.5 million Americans currently receive. In such a scenario, she explained, “we’re going to have the death spiral that this system was enacted to avoid.”
But the effects of the Court’s decision on America’s health sector shouldn’t be relevant. As Justice Kennedy explained in a 2004 opinion in Lamie v. U.S. Trustee, the Court cannot “soften the import of Congress’s chosen words even if [it] believe[s] the words lead to a harsh outcome.”
If the Court rules against the administration, Congress will have to step in to help the millions of folks who would lose their subsidies and thus have trouble affording Obamacare’s overpriced insurance policies.
As Justice Scalia said to Verrilli, “Do you think Congress is just going to sit there and let all of these disastrous consequences occur?”
Not if Reps. Paul Ryan (R-Wisc.), John Kline (R-Minn.), and Fred Upton (R-Mich.) have anything to say about it. Last week, the trio offered a reform plan to put in place if the Court rules for King.
Described as an “off-ramp from Obamacare,” their plan would give states and individuals choice in health care. States could opt out of Obamacare’s coverage requirements, as well as its individual and employer mandates. Without these strictures, which drive up the cost of insurance, patients would have a wider selection of health plans to choose from. They could then pick policies that best matched their needs and budget.
As Ryan, Kline, and Upton put it, the plan will put “Americans, not Washington, in the driver’s seat.”
The nine justices will rule on King in late June. If the Court sanctions the administration’s disregard for the text of the law, it will effectively award enormous new powers to the executive branch. Any time a statute — however clearly written — is judged inconvenient, the IRS or any agency would be free to change it.
The Court can avoid such abuses by siding with common sense — and not “gobbledygook.”