The U.S. Supreme Court today decided in the momentous case King v. Burwell to in essence uphold a significant portion of the Affordable Care Act (ACA) by deciding that individuals purchasing health insurance in federally run Exchanges are not excluded from obtaining tax subsidies to offset the cost. The decision, authored by Chief Justice Roberts, was 6 – 3. (Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan joined the Chief, and Justices Thomas and Alito joined in Justice Scalia’s dissent.)
The core of the King v. Burwell decision: although the ruling for the ACA did not come as a complete surprise, I think the opinion itself caught everyone a little off-guard. As you will recall, the crux of the matter was that one of the key subsidy provisions in the statutory language of the ACA itself seems to restrict provision of the subsidy to insurance purchased only on Exchanges established by the State and, thus, not to individuals purchasing insurance on federally run Exchanges.
Back in May of 2012, however, the IRS published a final regulation on individual eligibility for the tax subsidy under section 36B of the Internal Revenue Code; the regulation provided that the tax subsidies would be available to those enrolled in any Exchange, regardless of whether the Exchange were operated by the State or HHS.
Thus, the question before the Court seemed to be to determine whether the statutory language of the ACA was clear, and if not – if it was ambiguous – whether the regulation were based on a permissible construction of the statute.
Let’s back up a little.
The 4th Circuit Court of Appeals: The 4th Circuit decision (King v. Burwell, 4th Cir., No. 14-1158, 7/22/14), which was the case before the SCOTUS, found that the language of the ACA was “ambiguous and subject to multiple interpretations” as to whether tax subsidies are available only in plans purchased through state Exchanges. They also concluded that “nothing in the legislative history of the Act provides compelling support for either side’s position.”
Having decided that the relevant statutory language of the ACA was not definitive for purposes of resolving this issue, the court then concluded that it would be appropriate to defer to the IRS and uphold its regulatory interpretation. Thus, the 4th Circuit Court upheld the IRS regulation finding that tax subsidies are available to individuals purchasing health coverage through Exchanges established by the federal government or the States.
SCOTUS decision: The SCOTUS, however, took a different, and very interesting, path in finding that individuals are eligible for subsidies for insurance purchased through federal Exchanges as well as state Exchanges. They concluded that whether tax subsidies are available on federal Exchanges is a question of “deep economic and political significance” that is “central to this statutory scheme”. And they went on to say that if Congress had wished to assign this question to an agency, it would have done so directly. Then comes my favorite part: “It is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort… This is not a case for the IRS.” (Huh! No expertise in crafting health insurance policy! Not a case for the IRS! We are so getting these words bronzed and put into all our comment letters from here on out…)
Instead, the Roberts decision concluded that when deciding whether language is plain and unambiguous, “we must read the words in their context and with a view to their place in the overall statutory scheme”. And the decision then finds that the duty of the Court is to “construe statutes, not isolated provisions.”
The opinion goes on to state that the ACA statutory language regarding eligibility for a subsidy is ambiguous and that “the context and structure of the Act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.” Thus, the Court concludes the intent of the ACA would be thwarted if tax credits were not allowed for insurance purchased on any Exchange created under the Act:
Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.
In summary, the Court’s majority opinion concluded that: 1) the ACA words regarding eligibility for a subsidy were ambiguous; 2) even though the words were ambiguous, it was too important a matter to leave to IRS regulation; and 3) the words should be read “in context” with the meaning and intent of the rest of the Act, which was to permit individuals to obtain subsidies in all Exchanges, whether run by the states or the feds.
This third point is pretty interesting, I think, because it permits the Court to discern the intent of Congress in passing the ACA and frees it, to some extent, from purely judicial constraints in drawing its conclusions.
Thus, the Court points out that:
- “If tax credits were not available on Federal Exchanges, these provisions would make little sense.”
- “Congress wrote key parts of the Act behind closed doors, rather than through the traditional legislative process.”
- “…the Act does not reflect the type of care and deliberation that one might expect of such significant legislation.”
- “…the statutory scheme compels us to reject petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid.”
- “It is implausible that Congress meant the Act to operate in this manner.” and
- “So it stands to reason that Congress meant for those provision to apply in every State as well.” [emphasis added]
The dissent: Now let’s turn to the interesting stuff, which I can do now that my hands have recovered from reading the BLISTERING dissent from Justice Scalia. Honestly, I would say that the 21-page dissent was made up predominantly of scathing remarks about the majority opinion in King v. Burwell, with a few more thrown in for good measure critical of the original ACA decision in 2012 by Chief Justice Roberts that upheld the Act’s constitutionality in National Federation of Independent Business v. Sebelius.
The dissenting opinion accelerates out of the gate with a commentary on the finding by the majority that Exchanges can basically mean – for purposes of subsidy eligibility – those run by the states or those run by the feds: “That is of course quite absurd, and the Court’s 21 pages of explanation make it no less so.”
And a little later on, Justice Scalia writes: “But normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved.”
The coup-de-grace comes near the end, though, when the opinion states: “We should start calling this law SCOTUScare.”
And, finally:
And the cases will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.
One wonders how the SCOTUS can reconvene tomorrow with everybody being civil to each other! I mean, once you have referred to someone’s opinion as “pure applesauce” or “interpretive jiggery-pokery”, there is really no going back.
What’s next? The Supreme Court will release more decisions tomorrow and, apparently, Monday as well. “Smart money” has it that a decision in the Obergefell v. Hodges same-sex marriage case will be handed down on Monday. Of course, that same money (although maybe it was bitcoins) said that King v. Burwell would be handed down tomorrow, so there you have it.
ERIC action: In the wake of the King v. Burwell decision, the Exchanges have not been uprooted, and employers will find themselves facing the same onerous ACA as existed before the decision. ERIC will continue to pursue our priorities for the current Congress: repealing the ACA 40% excise tax, the employer mandate, and related reporting requirements. If the government does not soon withdraw its “inartful” position on Out-of-Pocket limits, we will also be working on securing Congressional assistance in our efforts to nullify the rule immediately.
Article by Gretchen Young, ERIC Senior Vice President for Health Policy