Supreme Court Accepts Appeal In Obamacare Subsidies Case
Somewhat surprisingly, the Supreme Court has accepted the appeal of a case that could completely gut the financial structure of the Affordable Care Act.
For the better part of two years now, a new challenge to the Affordable Care Act has made its way through the Federal Court system. Unlike the first challenge that the Supreme Court disposed of in 2012 when it upheld the constitutionality of the individual mandate, or the less broad based challenge at issue in Hobby Lobby and its related cases that dealt with the question of whether certain regulations regarding birth control could be applied against businesses with religious objections, this challenge goes to the text of the law itself. As I explained in the past, the argument basically involves the subsidies that many people who buy insurance through either the federal and state exchanges are entitled to if they meet certain income criteria. Those challenging the law contend that, by its strict language, the statute only allows the Internal Revenue Service to give subsidies those who buy insurance through an exchange exchange established by the individual states, not those who bought insurance through the exchange established by the Federal Government for those 30-odd states that refused to set up their own exchange. Supporters of the PPACA contend that, notwithstanding the language of the law, which does say what the people making this argument say it does, it is clear that Congress intended the subsidies to apply to all consumers and that the Court should give the law that broader interpretation. How this issue is decided is significantly important because the more restrictive interpretation would mean that much of the financial structure of the law would collapse of its own weight.
A number of lawsuits regarding the issue have been filed across the country, and this year there have been three rulings on the issue. In one case, Halbig v. Burwell, a panel of the D.C. Circuit Court of Appeals ruled that the law limited the subsidies only to the policies purchased through state exchanges. However, that case was accepted for en banc review by the entire D.C. Circuit so the panel decision has effectively been vacated. In another case, King v. Burwell, the Fourth Circuit Court of Appeals handed down a decision on the same day as Halbig that accepted the broader interpretation of the statute. Then, just last month, a Federal District Court in Oklahoma adopted the more restrictive statutory interpretation, agreeing with the decision of the D.C. Circuit Court panel. In the meantime, the Plaintiffs in King v. Burwell had filed for a Writ Of Certiorari, asking the Supreme Court to accept their case for appeal notwithstanding the fact that the en banc review in Halbig meant that there presently is no Circuit Court split on this issue. I thought at the time that the Justices would hold off on deciding what to do with the case until the D.C. Circuit ruled, but instead the Court today announced that it had accepted King v. Burwell for appeal, thus setting up another big case dealing with the PPACA for decision by the end of its current term:
The Supreme Court decided Friday that it would consider the latest challenge to the Affordable Care Act.
The justices decided to review an appeals court decision that upheld an Obama administration decision to extend tax subsidies to those who purchased health insurance through exchanges established by the federal government. The challengers argue that according to the wording of the statute, the subsidies should only extend to those in states that had established their own exchanges.
The administration and insurance companies say that would remove the underpinnings of Obamacare that made it workable.
The challenge focuses on four words in the massive bill. It said people would qualify for tax credits when they buy insurance in a market “established by the state.”
Only 14 states have established such exchanges. The law authorized the federal government to establish exchanges in those states that did not act, and it has done so.
Under a rule issued by the Internal Revenue Service, consumers can claim tax credits in any market. The administration says that is consistent with the law’s goal of making coverage available to all Americans.
But challengers claim the interpretation is contradicted by the wording of the law. They say the withholding of the tax credits was meant to spur states to create their own exchanges, and should not be available where states opted not to act.
About 4.6 million people in those states receive the credits. But the importance of them extends beyond, as all agree that they are essential to making the law work.
The court will consider an appeal from the U.S. Court of Appeals for the 4th Circuit, which unanimously ruled in King v. Burwell that the IRS interpretation was consistent with the intent of the law.
Lyle Denniston fleshes out some more detail:
Since the health care exchanges have been in operation, nearly five million individuals have received federal subsidies to help them afford health insurance on an exchange run by the federal government. The average subsidy had been about $4,700 per person. The fate of those subsidies apparently will now depend upon how the Court interprets four words in the Affordable Care Act. In setting up the subsidy scheme, Congress said it would apply to exchanges “established by the State.”
The challengers to subsidies for those who shop for insurance on a federal exchange have argued that those words limit the availability to the tax benefits solely to state-run exchanges. That argument failed in the U.S. Court of Appeals for the Fourth Circuit, in the ruling now under review. It was accepted in the U.S. Court of Appeals for the District of Columbia Circuit, but that ruling has now been set aside while the full D.C. Circuit reconsiders the issue.
Thus, as of now, there is no split in the federal appeals courts on the challengers’ argument and thus on the scope of the ACA language regarding subsidies. The lack of such a split, however, did not prevent the Court from going ahead to grant review of the King case, as the challengers had asked it to do. They had argued, among other points, that the longer the subsidies continue to consumers who had gone to federal exchanges, the harder it would be to undo the program if the Court were to accept the challengers’ interpretation.
It would have taken the votes of four Justices to grant review. The Court, as usual, did not indicate the way the Justices had voted on that question. It will take a majority, of course, to decide the case in the end. A ruling is not expected to emerge until near the end of the current Term, in late June or early July.
The new case appears to be as important to the functioning of the ACA, as it emerged from Congress in 2010, as was the mandate that every individual in the nation (with few exceptions) had to obtain health insurance by this year, or pay a financial penalty. The Supreme Court in June 2012 rejected a challenge to the individual mandate, finding that the arrangement Congress had made was a valid tax scheme. No one absolutely had to buy insurance, but those who did not would face a penalty as part of their filing of federal tax returns, as the Court viewed the mandate.
That was a decision based on the Constitution. The question presented by the case that the Court granted today is how to interpret legislative language chosen by Congress. Underlying that issue, however, is the broader question whether the words Congress chooses are to be the sole guide to what a law does, or whether the larger purposes that Congress seems to have in mind should determine how to read the words.
The challengers take the “literal interpretation” approach, although they also have policy reasons for reading the ACA as they do. The Obama administration takes the “broader purpose” approach, contending that Congress would not have set up the insurance program on a basis that is as limited as the challengers contend. There are Justices on the Court on both sides of that debate over interpreting federal laws.
Nicholas Bagley from the University of Michigan Law School sees this as bad news for the PPACA:
As I see it, what’s troubling here is not that the Court took King in the absence of a split. Its rulespermit it to hear cases involving “important question[s] of federal law that ha[ve] not been, but should be, settled by this Court.” It’s not remotely a stretch to say that King presents one such important question. On this, I part ways with those who claim that granting the case marks a clear departure from the Court’s usual practices.
No, what’s troubling is that four justices apparently think—or at least are inclined to think—that Kingwas wrongly decided. As I’ve said before, there’s no other reason to take King. The challengers urged the Court to intervene now in order to resolve “uncertainty” about the availability of federal tax credits. In the absence of a split, however, the only source of uncertainty is how the Supreme Court might eventually rule. After all, if it was clear that the Court would affirm in King, there would have been no need to intervene now. The Court could have stood pat, confident that it could correct any errant decisions that might someday arise.
There’s uncertainty only if you think the Supreme Court might invalidate the IRS rule. That’s why the justices’ votes on whether to grant the case are decent proxies for how they’ll decide the case. The justices who agree with King wouldn’t vote to grant. They would instead want to signal to their colleagues that, in their view, the IRS rule ought to be upheld. The justices who disagree with Kingwould want to signal the opposite.
And there are at least four such justices. If those four adhere to their views—and their views are tentative at this stage, but by no means ill-informed—the challengers just need one more vote to win. In all likelihood, that means that either Chief Justice Roberts or Justice Kennedy will again hold the key vote.
None of this bodes well for the government.
Bagely makes an excellent point. As I noted in my post about the Halbig and King decisions when they were handed down, there is a strong argument that current Supreme Court precedent supports the idea that statutory ambiguities should be resolved in favor of the interpretation that keeps a statutory scheme intact, as long as that interpretation is reasonable and not so far removed from what the statute actually says to be considered judicial re-writing of the law. Given that idea, an interpretation of that portion of the law that covers subsidies which holds that the “state” exchanges that the law talks about refers not just to exchanges directly set up by the state but also those established by Federal Government for the states that chose not to create their own exchange. At the same time, though, there is also an entirely different reasonable interpretation of the statute which says that if Congress had intended for the subsidies to apply to policies purchased on the Federal Exchange then it would have said so and that it would be improper for a Judge to substitute their judgment for that of what Congress, speaking through the statute, has actually said. This position would seem to be closest to what Justice Scalia has described as his “textualist” approach to interpretation of the law which eschews the idea that a Judge ought to rely much on sources outside of a statute or Constitutional provision to determine what the drafter meant. Under that approach, language that clearly only refers to state exchanges would seem to preclude an interpretation that goes beyond that interpretation and tries to substitute a Justice’s opinion for the intent of Congress as expressed in the only way Congress can do so, via the statute itself. Added to this is the fact that there is apparently very little in the Congressional Record that is on point to this issue that one could rely on to argue that the language as used was merely some kind of scrivner’s error and that Congress clearly intended the subsidies to apply to all policies regardless of where they were purchased.
The other point to remember, of course, is that unlike the Circuit Courts and the District Courts, the Supreme Court isn’t necessarily bound by its own precedent. Traditions such as stare decisis do ted to guide Justices to be careful when they are tempted to overrule existing precedent, of course. That is why you’re more likely to see a Supreme Court opinion distinguishing a case before it from an unfavorable precedent rather than explicitly overruling it than you are to see an opinion that states explicitly or implicitly that a previous decision is no longer good law. These practices are rooted in the idea that there should be stability in the law rather than constant change, especially given the fact that people tend to rely on the stability of law and that radical, constant change every time there is a new balance of power on the Court undercuts that reliance. In the end though,those traditions are just that, traditions rather than rules. If a majority thinks a prior case was wrongly decided, it is perfectly entitled to proceed accordingly. So, even if previously existing statutory interpretation rules would have saved the subsidies, if there are five votes to go in a new direction, or five votes that rule that those rules require the court to adopt the more restrictive standard that the initial D.C. Circuit panel adopted, then the Court could end up dealing a blow to the PPACA that, in the end, would be far more serious than the loss of the individual mandate would have been.
Most likely, the acceptance of this appeal now means we’ll see oral argument early in 2015, with a decision, well, probably not until late June since that seems to be when the Court likes to release its most monumental opinions.