Yesterday the Supreme Court heard arguments in King v. Burwell, a stealth challenge to the feasibility
of the "individual mandate" that underlies the Affordable Care Act
(ACA) -- so-called "Obamacare." (Not so stealthy anymore,
as it turns out; once something makes the New York Times front page,
it's no longer flying under the radar.)
Coverage of the case in the Times and elsewhere has been extensive, and I won't delve into the nitty-gritty details here. Here's a brief overview. The plaintiffs in the case are using some sloppy wording in the statute as a sort of loose thread in the sweater: they hope the Supreme Court will tug on that string and eventually unravel the individual mandate provision, along with much else in the law.
The "individual mandate" is the ACA's requirement that most individuals obtain a certain minimum amount of health insurance, either through an employer, on the open market, or through so-called "exchanges" operated by the federal government and some states. People who fail to obtain the required insurance pay a tax penalty, which is due to kick in for the first time during the current tax season. In 2012, the Court upheld the individual mandate against a constitutional challenge, with Chief Justice John Roberts as the necessary swing vote (joining the Court's four more-liberal justices). Game over, right?
Not so fast. By the terms of the statute, a person is not subject to the individual mandate if the costs of obtaining health insurance exceed a certain percentage of her annual household income. For many lower-income people, those costs are reduced by government subsidies in the form of tax credits issued by the IRS. Without these subsidies, health insurance would exceed the cost threshold for many Americans, and those people would become exempt from the individual mandate. Many of them presumably would not buy insurance at all.
Now here's the problem. The provision of the ACA that tells the IRS how to calculate these tax credits, if read literally and in isolation, allows credits only to taxpayers who purchase insurance "through an Exchange established by the State." But the ACA also gives states the choice of whether to establish their own exchanges, and only 16 have done so (plus the District of Columbia); the rest are run by the federal government. The plaintiffs in King therefore argue that taxpayers in 34 states are ineligible for the tax credits.
What would be the result if this argument succeeds? Denying tax credits to these taxpayers -- eventually, roughly 12.5 million people -- would mean that many (probably most) of them will no longer be subject to the individual mandate. Many or most of them, in turn, probably will not purchase health insurance, thus dropping out of the insurance pool. This will drive insurance premiums up for those who stay in the pool; some of those people then will exceed the cost-to-income threshold, removing themselves from the individual mandate and, consequently, dropping out of the insurance pool. Costs will go up even further for those remaining in the pool; some of them will then escape the mandate and drop out, driving costs up even more. And so on -- a vicious cycle, or "death spiral," that might eventually defeat the main purpose of the ACA, which was to provide relatively low-cost health coverage to millions of Americans who otherwise could not afford it.
And that, of course, is the whole point of the lawsuit in King v. Burwell. It's a back-door attempt to do what the ACA's opponents failed to do directly in 2012, namely gut Obamacare.
Will the attempt succeed? I was skeptical before yesterday's arguments and remain skeptical today. There are three main reasons for my skepticism (or should I say optimism).
The first is simply that the law is against the plaintiffs in King. It's true that the single sentence they point to, if read literally and out of context, seems to say that tax credits are not available for taxpayers in states without their own exchanges. But this is one sentence in a 2,000-page piece of legislation. The Court -- including its most conservative members, who like to focus on the literal meaning of texts -- has frequently said that statutory language must be interpreted "by reference to ... the broader context of the statute as a whole." (This quote comes from Justice Clarence Thomas's opinion for the Court in a 1997 case, Robinson v. Shell Oil Co.) The "broader context" of the ACA makes clear its goal of providing affordable insurance coverage to as many Americans as possible. Reading the statute to deny tax subsidies to millions of people, based on a single sentence in an obscure provision of the law, would make hash of this purpose.
At worst, the ACA is ambiguous on the question whether taxpayers in non-exchange states are entitled to the credits. And the Court has long followed the rule (known as Chevron deference) that in cases of statutory ambiguity, the judiciary must defer to the reasonable interpretation endorsed by the agency charged with administering the statute -- in this case, the IRS. The IRS reads the statute to allow the tax credits, and if the Court thinks the statutory language is ambiguous, it should uphold the IRS's reading. (This is the basis on which the lower court in King v. Burwell rejected the plaintiff's challenge.)
But while the law is against the plaintiffs, it's not quite a slam dunk; there's enough room for the Court to buy the plaintiffs' arguments if the majority is inclined to do so. Which leads me to the second and third reasons why I think the plaintiffs will lose.
The second reason is a comment made by Justice Anthony Kennedy during oral arguments yesterday. Justice Kennedy told the attorney arguing for the plaintiffs that their position “raises a serious constitutional question” about the relationship between the state and federal governments. He was referring to the fact that denying tax credits to people in non-exchange states would put those states to a Hobson’s choice: either set up their own exchanges or watch hundreds of thousands of their citizens lose their insurance coverage (and the possible collapse of the health-insurance market in that state). There are a couple constitutional doctrines that might limit the federal government’s ability to essentially force a state government to act in this way. The Tenth Amendment prohibits the feds from “commandeering” state governments to enforce federal law; requiring states to create insurance exchanges or watch their insurance markets crater might conceivably qualify as prohibited “commandeering.” The Court also has imposed limits on Congress’ ability to coerce states into action using the power of the purse; Congress may entice states to regulate using federal money as a carrot, but it may not deny the states a “legitimate choice” by using federal funds as a cudgel. Arguably a law that allows federal tax credits only to citizens in states that establish their own exchanges crosses this line.
I personally don’t think that either of these arguments is a winner, assessed on its merits. But the point is that Justice Kennedy appears to think so. Justice Kennedy has established a reputation, for better or worse, of taking positions in highly controversial cases that tread a fine line, resolving the particular dispute at hand without committing to deeply disputed principles. His comment about federalism yesterday suggests he might do the same in King v. Burwell – perhaps endorsing the government’s reading of the tax-credit provision in order to avoid the “serious constitutional question” involving federal coercion of the states. That would be a crucial swing vote against the plaintiffs – perhaps the fifth vote necessary to reject their challenge.
The third reason I think the King plaintiffs will lose is Chief Justice Roberts. In NFIB v. Sebelius, the 2012 case challenging several aspects of the ACA on constitutional grounds, the Chief Justice surprised almost everyone by siding with the government to uphold the individual mandate. He took a big risk in doing so: his vote triggered the wrath of disappointed fellow conservatives. I find it hard to believe that the Chief Justice – having stuck his neck out to uphold the individual mandate in a squarely presented constitutional challenge – would now meekly vote with his fellow conservatives to kill the law by indirect means. Of course, there are other theories. But I would not be surprised if the Chief Justice too sided with the government in King – either on Chevron deference grounds, or as a way of avoiding supposed federalism problems, in league with Justice Kennedy.
In other words, a 6-3 decision for the government in King would not shock me. (I have no hope that Justices Scalia, Thomas, or Alito will bring themselves to vote in favor of Obamacare.) But I’m only slightly better at picking the results of controversial Supreme Court cases than I am at calling NCAA tournament games, so I wouldn’t take my prediction to the bank. We’ll find out (most likely) in late June.
Coverage of the case in the Times and elsewhere has been extensive, and I won't delve into the nitty-gritty details here. Here's a brief overview. The plaintiffs in the case are using some sloppy wording in the statute as a sort of loose thread in the sweater: they hope the Supreme Court will tug on that string and eventually unravel the individual mandate provision, along with much else in the law.
The "individual mandate" is the ACA's requirement that most individuals obtain a certain minimum amount of health insurance, either through an employer, on the open market, or through so-called "exchanges" operated by the federal government and some states. People who fail to obtain the required insurance pay a tax penalty, which is due to kick in for the first time during the current tax season. In 2012, the Court upheld the individual mandate against a constitutional challenge, with Chief Justice John Roberts as the necessary swing vote (joining the Court's four more-liberal justices). Game over, right?
Not so fast. By the terms of the statute, a person is not subject to the individual mandate if the costs of obtaining health insurance exceed a certain percentage of her annual household income. For many lower-income people, those costs are reduced by government subsidies in the form of tax credits issued by the IRS. Without these subsidies, health insurance would exceed the cost threshold for many Americans, and those people would become exempt from the individual mandate. Many of them presumably would not buy insurance at all.
Now here's the problem. The provision of the ACA that tells the IRS how to calculate these tax credits, if read literally and in isolation, allows credits only to taxpayers who purchase insurance "through an Exchange established by the State." But the ACA also gives states the choice of whether to establish their own exchanges, and only 16 have done so (plus the District of Columbia); the rest are run by the federal government. The plaintiffs in King therefore argue that taxpayers in 34 states are ineligible for the tax credits.
What would be the result if this argument succeeds? Denying tax credits to these taxpayers -- eventually, roughly 12.5 million people -- would mean that many (probably most) of them will no longer be subject to the individual mandate. Many or most of them, in turn, probably will not purchase health insurance, thus dropping out of the insurance pool. This will drive insurance premiums up for those who stay in the pool; some of those people then will exceed the cost-to-income threshold, removing themselves from the individual mandate and, consequently, dropping out of the insurance pool. Costs will go up even further for those remaining in the pool; some of them will then escape the mandate and drop out, driving costs up even more. And so on -- a vicious cycle, or "death spiral," that might eventually defeat the main purpose of the ACA, which was to provide relatively low-cost health coverage to millions of Americans who otherwise could not afford it.
And that, of course, is the whole point of the lawsuit in King v. Burwell. It's a back-door attempt to do what the ACA's opponents failed to do directly in 2012, namely gut Obamacare.
Will the attempt succeed? I was skeptical before yesterday's arguments and remain skeptical today. There are three main reasons for my skepticism (or should I say optimism).
The first is simply that the law is against the plaintiffs in King. It's true that the single sentence they point to, if read literally and out of context, seems to say that tax credits are not available for taxpayers in states without their own exchanges. But this is one sentence in a 2,000-page piece of legislation. The Court -- including its most conservative members, who like to focus on the literal meaning of texts -- has frequently said that statutory language must be interpreted "by reference to ... the broader context of the statute as a whole." (This quote comes from Justice Clarence Thomas's opinion for the Court in a 1997 case, Robinson v. Shell Oil Co.) The "broader context" of the ACA makes clear its goal of providing affordable insurance coverage to as many Americans as possible. Reading the statute to deny tax subsidies to millions of people, based on a single sentence in an obscure provision of the law, would make hash of this purpose.
At worst, the ACA is ambiguous on the question whether taxpayers in non-exchange states are entitled to the credits. And the Court has long followed the rule (known as Chevron deference) that in cases of statutory ambiguity, the judiciary must defer to the reasonable interpretation endorsed by the agency charged with administering the statute -- in this case, the IRS. The IRS reads the statute to allow the tax credits, and if the Court thinks the statutory language is ambiguous, it should uphold the IRS's reading. (This is the basis on which the lower court in King v. Burwell rejected the plaintiff's challenge.)
But while the law is against the plaintiffs, it's not quite a slam dunk; there's enough room for the Court to buy the plaintiffs' arguments if the majority is inclined to do so. Which leads me to the second and third reasons why I think the plaintiffs will lose.
The second reason is a comment made by Justice Anthony Kennedy during oral arguments yesterday. Justice Kennedy told the attorney arguing for the plaintiffs that their position “raises a serious constitutional question” about the relationship between the state and federal governments. He was referring to the fact that denying tax credits to people in non-exchange states would put those states to a Hobson’s choice: either set up their own exchanges or watch hundreds of thousands of their citizens lose their insurance coverage (and the possible collapse of the health-insurance market in that state). There are a couple constitutional doctrines that might limit the federal government’s ability to essentially force a state government to act in this way. The Tenth Amendment prohibits the feds from “commandeering” state governments to enforce federal law; requiring states to create insurance exchanges or watch their insurance markets crater might conceivably qualify as prohibited “commandeering.” The Court also has imposed limits on Congress’ ability to coerce states into action using the power of the purse; Congress may entice states to regulate using federal money as a carrot, but it may not deny the states a “legitimate choice” by using federal funds as a cudgel. Arguably a law that allows federal tax credits only to citizens in states that establish their own exchanges crosses this line.
I personally don’t think that either of these arguments is a winner, assessed on its merits. But the point is that Justice Kennedy appears to think so. Justice Kennedy has established a reputation, for better or worse, of taking positions in highly controversial cases that tread a fine line, resolving the particular dispute at hand without committing to deeply disputed principles. His comment about federalism yesterday suggests he might do the same in King v. Burwell – perhaps endorsing the government’s reading of the tax-credit provision in order to avoid the “serious constitutional question” involving federal coercion of the states. That would be a crucial swing vote against the plaintiffs – perhaps the fifth vote necessary to reject their challenge.
The third reason I think the King plaintiffs will lose is Chief Justice Roberts. In NFIB v. Sebelius, the 2012 case challenging several aspects of the ACA on constitutional grounds, the Chief Justice surprised almost everyone by siding with the government to uphold the individual mandate. He took a big risk in doing so: his vote triggered the wrath of disappointed fellow conservatives. I find it hard to believe that the Chief Justice – having stuck his neck out to uphold the individual mandate in a squarely presented constitutional challenge – would now meekly vote with his fellow conservatives to kill the law by indirect means. Of course, there are other theories. But I would not be surprised if the Chief Justice too sided with the government in King – either on Chevron deference grounds, or as a way of avoiding supposed federalism problems, in league with Justice Kennedy.
In other words, a 6-3 decision for the government in King would not shock me. (I have no hope that Justices Scalia, Thomas, or Alito will bring themselves to vote in favor of Obamacare.) But I’m only slightly better at picking the results of controversial Supreme Court cases than I am at calling NCAA tournament games, so I wouldn’t take my prediction to the bank. We’ll find out (most likely) in late June.
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