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Court rules ACA subsidies stay in place
SCOTT PIEPHO
Legal News Reporter
Published: July 2, 2015
In the last Thursday of the term, the Supreme Court released its ruling King v. Burwell, a highly anticipated case that had the potential of significantly disrupting the Affordable Care Act.
In a 6-3 decision authored by Chief Justice Roberts, the court ruled in favor of the government’s position that subsidies for insurance premiums under the Affordable Care Act are available regardless of whether an insurance policy is purchased in a state with a state-established insurance exchange or one in which the exchange is established by the federal government.
The ACA encourages states to set up insurance exchanges. In those states that do not establish exchanges, the Act instructs the Secretary of the Treasury to establish an exchange.
Observers both for and against the ACA agreed that had the court sided with the challengers, millions of people currently receiving subsidies would have lost them.
Chief Justice Roberts’s opinion was joined by justices Breyer, Ginsburg, Kagan, Kennedy and Sotomayor. Justice Scalia wrote a vigorous dissent, joined by justices Alito and Thomas.
At issue is Section 36(B) of the Internal Revenue Code, amended by the ACA to create the procedure for determining the amount of subsidy a person is entitled to. The section calculates subsidy in part based on the premium of a health care plan enrolled in through an “exchange established by the State under section 1311” of the ACA.
Plaintiffs claimed that under those provisions, a person is only entitled to a subsidy if he lives in a state that established an exchange. A federally established exchange is not an “exchange established by the State” plaintiffs argued.
The plaintiffs, who objected to being required to purchase health insurance, further argued that if they were not entitled to subsidies, the health insurance plans available in their states would cost more than 8 percent of their incomes, entitling them to an exemption from the ACA’s mandate that they purchase insurance.
The IRS had promulgated regulations that made subsidies available for health care plans purchased in either state- or federally-established exchanges.
The 4th Circuit dismissed one of the cases, holding that the agency’s interpretation 36(B) was entitled to deference under a principle first announced in the court’s Chevron case. The DC Circuit disagreed, finding that Chevron deference did not apply.
As an initial matter the court found that Chevron does not apply in this case. Chevron deference depends on the idea that Congress implicitly delegates to agencies the power to interpret statutes.
In certain cases, the court will find that Congress did not intend such delegation. The chief justice found that Congress did not intend the IRS to interpret the ACA, given that it represents “a question of ‘deep economic and political significance’ that is central to this statutory scheme.”
According to University of Akron School of Law Professor Bill Jordan, a recognized expert on Chevron, “King has strengthened the proposition that there is a ‘major issue’ exception to Chevron.” He further noted that reaching that conclusion was not strictly necessary given the court’s finding that the text supports the government’s position.
“Of course, if that’s the case, why does it make a big deal of saying that deference should not apply to a case this important?” said Jordan.
With the Chevron issue resolved, the argument between the court and the dissent focuses on the text of the statute.
The court concedes that the plaintiffs’ argument, adopted by the dissent, is based on a good argument for the plain meaning of the statute, but argues that in the context of the entire statute the phrase is ambiguous. Given that ambiguity, the court should adopt an interpretation that matches the plain intent of the statute.
The dissent maintains that the phrase is unambiguous and that the court is choosing to ignore the plain language in order to impose their vision of the statute’s intent.
Akron Professor Emeritus Wilson Huhn calls this a classic case of text versus intent.
“This kind of thing has been going on not just for hundreds of years but thousands of years. You go back to Roman law and find this kind of jurisprudential conflict between what the words of the law say and what they meant, what they were supposed to mean.”
Huhn, who wrote a book about the ACA, notes that the court’s decision goes beyond simply finding that Congress made a drafting error. That is particularly evident in a section of the opinion examining the two sections that authorize state and federal exchanges.
Section 1311 (now codified as section 18031 of the U.S. Code) authorizes states to set up exchanges.
U.S. Code section 18041 directs the Secretary of Treasury to set up “such exchanges” in the event that a state does not, referring back to the section 18031 exchanges. The court finds that the term “such exchanges” indicates that state and federal exchanges differ in no meaningful way.
According to Huhn, the court found that the phrase “exchange established by the state” to be “a term of art” for either a state-established or federally-established exchange.
Professor David Cohen from the University’s Bliss Institute of Applied Politics believes that Republicans “dodged a big bullet” with this decision “because they had no plan to replace it and a lot of people would have become uninsured.
Looking toward the next election, Cohen made his own prediction.
“Republican presidential candidates are going to bring it up in places like Iowa, New Hampshire, South Carolina – those early primary states – and they’ll see if they get any traction,” he said. “There’s certainly going to be a small percentage of Republican primary voters who get riled up, but I’m not sure that its going to have any impact in 2016. Probably not.”
He said that with this decision, the court “removed Obamacare as a serious campaign issue.”
And Huhn predicts that the next set of questions the nation will confront about health care will revolve around employer-based health insurance.
“I could easily see a situation where insurance purchased through the exchange is routinely cheaper than health insurance through employers.”