Outside the Beltway

Supreme Court Appears Divided In Latest Obamacare Case

Once again, the Supreme Court appears to be sharply divided on the latest challenge to the Affordable Care Act.

Doug Mataconis · Wednesday, March 4, 2015 · 19 comments

Today, the Supreme Court heard oral argument in King v. Burwell, a case that many have described as one that could be a “death knell” for the Affordable Care Act if the Court were to rule in favor of the challengers. At issue in the case is the interpretation of one specific portion of the 2010 law dealing with the tax subsidies provided to people who purchase health insurance provided that they meet certain income requirements. At its most basic level, this provision of the law, which authorizes the Internal Revenue Service to calculate and award tax subsidies to people who purchase insurance on exchanges “established by the state,” the law appears to limit the subsidies to only those people who live in states that have set up their own PPACA exchanges rather than relying on the Federal Government to do so. The IRS, however, has interpreted the law to allow it to grant subsidies regardless of whether a taxpayer has purchased their health insurance on a state-based or Federal exchange, which the Plaintiffs contend is an improper extension of the agency’s authority under the law. The Federal Government, meanwhile, contends that the should be read more broadly than the Plaintiffs are asking the Court to do and that it is clear that the overall regulatory scheme established by the PPACA contemplates that subsidies would be available regardless of what type exchange insurance was purchased from.

By and large, the lower Federal Courts have sided with the Federal Government in the lawsuits that have been brought on this matter.  District Courts in the District of Columbia and Virginia both ruled in favor of the government, as did the Fourth Circuit Court of Appeals in the Virginia case, which is the one that has made its way to the Supreme Court. A Federal Judge in Oklahoma, meanwhile, has ruled against the Federal Government, as did the Court of Appeals for the D.C. Circuit in a decision released on the same day as the Fourth Circuit decision that was ultimately voided when the D.C. Circuit granted en banc appeal in the matter. A fourth case is currently on hold in Federal District Court in Indiana pending the Supreme Court’s decision. As I noted when I wrote about the two Circuit Court decisions, the financial implications of a ruling for the Plaintiffs in these case could be quite stark:

The implications of the fate of this provision of the law are fairly clear, and potentially devastating to the financial stability of the entire exchange system under the PPACA. A preliminary estimate after the D.C. Circuit’s decision came down was that the decision would impact at least 4.7 million of the 5.4 million people who have signed up for subsidies via the Federal Exchanges. While that seems like a low number, the actual impact could be much larger because the loss of subsidies could lead many of these people to decide to drop coverage altogether, especially younger, healthier people for whom the non-subsidized premiums would be unaffordable. If this happened, then it could lead to increased premiums across the board as the risk pool would then become more titled toward older, less healthy individuals. Even leaving possibility out of the equation, though, by one estimate, the financial impact of this ruling of upholding this ruling would amount to some $36 billion in subsidies to people in the states that are under the Federal exchange.

By the time today’s hearing ended, it was rather unclear where the Court will ultimately end up on this matter, although it is fairly clear that this will be yet another PPACA case in which the Justices will be sharply divided:

WASHINGTON — The Supreme Court on Wednesday seemed bitterly divided during heated arguments over the fate of President Obama’s health care law.

As expected, the court’s four liberal members voiced strong support for the administration’s position. But the administration must almost certainly capture the vote of either Chief Justice John G. Roberts Jr. or Justice Anthony M. Kennedy to prevail.

The chief justice said almost nothing.

Justice Kennedy asked questions suggesting that he was uncomfortable with the administration’s reading of the statute. But he added that the challengers’ reading posed problems, too.

“Your argument raises a serious constitutional question,” he told their lawyer.

Solicitor General Donald B. Verrilli Jr. argued for the Obama administration, facing Michael A. Carvin, who represented the plaintiffs in another challenge to the law that reached the Supreme Court in 2012.

he argument, which lasted 80 minutes rather than the usual hour, started with a presentation from Mr. Carvin that was tied closely to the text of the law.

“This is a straightforward question of statutory interpretation,” he said, referring to a provision in the law that seems to say that subsidies are available only to people living where the insurance marketplaces, known as exchanges, had been “established by the state.”

Mr. Carvin faced a barrage of questions from the court’s liberal wing focusing on the health care law as a whole.

“We don’t look at four words,” Justice Elena Kagan said. “We look at the whole text.”

Justice Stephen G. Breyer echoed the point.

“If you want to go into the context” of the law, he told Mr. Carvin, “at that point your argument really is weaker.”

Justice Sonia Sotomayor said Mr. Carvin’s reading of the law would have devastating consequences. “We’re going to have the death spiral that this system was enacted to avoid,” she said.

Justice Kennedy repeatedly asked whether Congress had the constitutional authority to make states choose between setting up their own insurance exchanges and letting their citizens lose tax subsidies to help them buy insurance.

“There is a serious constitutional problem here if we adopt your position,” he told Mr. Carvin.

Justice Kagan made a similar point, saying that a properly drafted law would have made the choice more stark. “That’s not the clarity with which we expect the government to speak when it’s upsetting federal-state relations,” she said.

(…)

Justice Antonin Scalia responded that the law “means what it says” even if that has negative consequences. He and Justice Samuel A. Alito Jr. added that Congress and the states could promptly address a ruling rejecting the subsidies. Justice Alito said the Supreme Court might even defer the effective date of its decision.

Justice Kennedy, who had asked tough questions of Mr. Carvin, did not seem satisfied with Mr. Verrilli’s argument either. Mr. Verrilli’s reading of the law, Justice Kennedy said, “seems to me to go in the wrong direction, not the right direction, for your case.”

The court’s decision, expected by late June, will determine whether roughly seven million low- and middle-income people in some three dozen states will continue to receive subsidies to help them buy health insurance.

Buzzfeed’s Chris Geidner summarized the oral argument today as indicating that the Justices were reluctant to issue a ruling that would have the apparent adverse implications that a ruling for the Plaintiffs would have here, but SCOTUSBlog’s Lyle Denniston is more circumspect in his evaulation of the state of the case at this point but also noted that the signals from oral argument do seem to be favorable for the Federal Government’s position:

One of the most important functions of oral argument in the Supreme Court is that it can strongly shape the next round: the private deliberations among the nine Justices as they start work on a decision.  The much-awaited hearing Wednesday on the stiff new challenge to the Affordable Care Act strongly suggested that Topic A in private could well be: how bad will we make things if we rule against the government?

Justice Anthony M. Kennedy, who seemed decidedly more sympathetic to the government than might have been expected, worried over a constitutional blow against the states.  But even the two Justices most openly sympathetic to the challengers — Justices Samuel A. Alito, Jr., and Antonin Scalia — seemed to concede the dire consequences that could follow, by suggesting ways to alleviate it.  Alito said the Court could delay its ruling to allow time to adjust, and Scalia said Congress could be counted on to fix it.

On Friday morning, when the Justices start their private conversation on the case of King v. Burwell, what those three said in public in an eighty-four-minute hearing Wednesday could set the tone, and the public signs were that the tone could be mostly favorable to the government — that is, the chances seemed greater for a ruling salvaging a nationwide subsidy system that makes the new health care insurance exchanges actually work in an economic sense, thus keeping it alive.

(…)

The Court’s more liberal members harped on the expected problems of the demise of the ACA throughout the arguments of the lawyers for both the challengers and the government, and they left almost no doubt that they would vote to uphold the nationwide subsidy system — in the thirty-four states where the insurance marketplace is run by the federal government, as well as in the sixteen where states set up exchanges (and where there is no doubt that subsidies are available).

That would give the government a four-vote start, from Justices Stephen G. Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor.

It did not take long, at least when the government lawyer was at the lectern, to create the distinct impression that Justice Scalia was with the challengers, and Justice Alito was rather plainly leaning that way.  Everyone assumes, of course, that Justice Clarence Thomas, though he said nothing, as usual, is also very likely a vote for the challengers.

If those impressions hold, that means Chief Justice John G. Roberts, Jr., and Justice Kennedy could be holding the deciding vote when the Court makes up its mind in the end of the process.  The Chief Justice said so little that there was no dependable reading on what was on his mind.  One might suspect, though, that he would not necessarily be comfortable in voting on the losing end in this historically profound case.

Thatleaves Justice Kennedy.  In one sense, he sort of leaned toward the idea that the language of the ACA as it deals with the subsidy system and the exchanges might be clear enough that the Court would have no choice but to rule against the government, and find that Congress made subsidies available only on marketplaces run by the state governments.

But in a broader sense, he displayed a deep concern — entirely consistent with his long-held view that the Court owes utmost respect to the semi-sovereign states and their role under what he calls the Constitution’s “design” — that Congress should ordinarily not be allowed to coerce the states into doing something that Congress wants.

On Wednesday, as the challengers’ lawyer, Washington attorney Michael A. Carvin, who opened the hearing, was under heavy and sometimes impatient questioning by the more liberal Justices, Kennedy bided his time.   In recent years, he has seemed to be a more hesitant questioner, so he appeared to be sitting back to see where the hearing was going.

But then, starting with a reference to “the dynamics of federalism,” he raised the coercion point.  “If your argument is accepted,” Kennedy told Carvin, and “the states were told to establish exchanges in order to receive money [for their citizens] or send the insurance market into a death spiral; isn’t that coercion?   Under your argument, there would be a serious constitutional problem.”

Carvin replied that “the government has not made that argument,” Kennedy shot back tartly that the members of the Court can come up with arguments of their own.

As I’ve said before, trying to parse how a case will turn out based on oral argument is often a fool’s errand. More often than not, the questions that judges ask attorneys end up having little relationship to a cases ultimate disposition. The Affordable Care Act itself provides an excellent example of this given the fact that the oral argument on the Constitutional challenges to the law in March 2012 seemed to indicate quite strongly that there was a majority on the Court ready to strike down the law. Ultimately, of course, the law ended up surviving the challenge thanks to Chief Justice Roberts. Notwithstanding that caveat, though, it seems quite obvious that this is likely to be another case dealing with the health care law in which the Court will be sharply divided on ideological grounds. The Court’s four liberal members will all likely rule in favor of an interpretation of the statute that finds the IRS’s rule applying subsidies to both state and federal exchanges to be proper, while Justices Thomas, Scalia and Alito all appear to be solid votes for the Plaintiffs narrower interpretation of the law. As Denniston notes that leaves Justice Kennedy, who as usual was quite active in his questioning of both sides, and Chief Justice Roberts, who was unusually quiet during today’s session. Kennedy, of course, had voted with the minority in the 2012 PPACA case, while Roberts ended up writing a majority opinion that ended up accepting the argument that the individual mandate violate the Commerce Clause, but that it was a proper exercise of Congress’s taxing power. That doesn’t tell us much of anything about how they might decide in this case, of course, but it does tell us that we should refrain from trying to guess how the case will turn out until we actually see the decision.

I’ve written about the legal arguments involved in this case before — see here, here, and here — so I’m not going to rehash them again. In any case, the Court will decide the matter once and for all in June, although it’s likely to be among the final decisions released during the current term.

Here’s the transcript of the oral argument, audio of today’s session will be available at the Court’s website by the end of this week:

King v. Burwell Transcript by Doug Mataconis