King vs. Burwell and the Importance of 5 Words

On Wednesday, the Supreme Court will hear argument in the case of King vs. Burwell.  This is the so-called Obamacare subsidy case and whether those tax subsidies should be extended to those taxpayers who purchased insurance on the Federal exchange known as Healthcare.gov.  As I mentioned in the previous article, this is not a case of the constitutionality of the law, but one of statutory interpretation- an area the Supreme Court handles and deals with more often than outright constitutional issues.  Given the complexity of today’s laws, that is to be expected.  Given Obamacare, which is complexity on steroids, this case was inevitable.

Numerous articles have been written on this case and I could refer one to Scotusblog.org for a great series of articles presented as a symposium among legal minds.  More importantly, there have been numerous studies that analyze how the Supreme Court approaches these types of cases.  There are generally two camps of thought.  Both, however, use two primary analytical frameworks: the actual words of the law and their common law usage, and what makes sense.  It is in this latter area where the analysis diverges.

The first group looks at the larger legal landscape.  They look at and analyze not only the common law, but also Constitutional provisions (if applicable and there are none in this case), previous cases in dealing with similar issues, and other laws for similarities.  In the end, they tend to concentrate on the practical consequences of any rulings and, most importantly, how the law can be or is administered given their outcome.

The second group, which tends to be in the dissenting minority, instead focuses on policy.  To do such, they attempt to make sense of what Congress was intending to do when they wrote the law.  Thus, they are more apt to use tools like the statutory purpose of the provision in question, inferences of Congressional intent, and the legislative history of the law in question.  Their analysis could best be described as a search for policy constancy rather than implications and practical concerns.

It should be noted that no single Justice relies exclusively on one method of analysis to the exclusion of the other.  There are strange cross breedings of analysis that often results in some strange alliances that defy what would be expected.  So, it is best to look at the top 5 methods of analysis most often employed.

The first is the actual text of the law and its plain meaning.  If the Court were to exclusively use this analysis, then the King would necessarily win.  The applicable clause of the ACA mentions that federal tax subsidies would be extended to those who purchased insurance on State-established exchanges.  The reasoning, they offer, is that this was a carrot being extended to the states to set up health care insurance exchanges.  Thirty-four states failed to do so for a variety of reasons.  But rarely do they exclusively use this analysis.

The second analysis is the practicality of the provision in question.  As mentioned, the practical purpose of the federal subsidy offer was to induce states to establish exchanges.  Congress knew there would be practical and political opposition to these exchanges and this offer of subsidies was designed to essentially buy off the states.  In fact, there are other provisions of the ACA that are worded specifically to target individual states as concerns Medicaid expansion- the so-called Cornhusker Kickback and Louisiana Purchase.  If Congress could be so specific in wording that they can directly and with surgical precision target individual states, it begs the question as to why they would leave the federal subsidy provisions so ambiguous.  The government argues that the “ambiguity” can be cleared up by references to other clauses in the ACA that seem to indicate the federal subsidy could be offered if insurance was purchased on the federal exchange.  Why they did not explicitly say so is of importance here.

The third analysis is the purpose of the provision.  Again, this is answered above.  But, now we are getting into deeper territory.  What was the purpose of the ACA?  Was it to lower health care premiums?  Was it to insure the uninsured?  Was it to break the yoke between employer and employee when it came to health insurance so that insurance was more portable?  Was it another, small step on the path to a single-payer system?  One thing that may hurt (or help) the administration’s view is the numerous subsequent delays in mandates.

The fourth area is the legislative history of the law.  One would think that after a year of debate and hearings that Congress would write a law that left out any ambiguity.  What makes the ACA a difficult vehicle to study is that it is not only the ACA that needs to be analyzed, but also the Health Care and Education Reconciliation Act of 2010 that amended the ACA almost immediately after its passage.  And in this area, we need to understand that the final ACA was actually a combination of two bills originating from two different Senate committees.  In those original versions of the bills, Democrats dropped language that would have delayed federal tax subsidies if a state failed to establish an exchange.  Although the federal government could step in and create the exchange, there is the inference that the subsidy would be available to those on the federal exchange, not exclusively for state exchange enrollees, albeit with a four year delay- a sort of mini-punishment. Dropping this provision gives weight to the argument that the subsidies were written into the law as a carrot to induce states to set up exchanges since they could not use a stick.  In the original Obamacare case, the Court ruled just that in the case of Medicaid expansion- the carrot was acceptable, but not the stick.

Today, we hear the supporters of Obamacare and those who had a role in formulating the law say that there was never any debate over whether subsidies would be offered to those who purchased insurance on the federal exchange.  However, from every analysis done on the original bills which came from either the Senate HELP Committee or Finance Committee, we find examples of wrangling over this very issue, the result of which is the language we get today.

The final area to be looked out would be the intent of Congress in passing the law and wording a provision of that law as they did- not as they should have.  If the intent was to get as many people insured as possible, then the government should prevail here.

But there is another equally important consideration- Chevron deference.  This is based upon a case where in the case of ambiguously worded laws or provisions, deference is to be given to agency interpretations when they formulate rules and regulations when given the authority under those laws.  The Roberts Court has been, in the overall sense, rather leery of broad agency interpretations of laws.  However, in recent years they have softened that stance somewhat.  There are some recent cases where they have ruled that government agencies overstepped their boundaries and they have instead relied upon the clear wording of the law.

It should also be mentioned that the IRS originally determined that the subsidies could only be offered to those purchasing insurance on state exchanges, not the federal exchange.  However, it was under political pressure by the White House that the IRS then reversed course and declared their interpretation was rooted in the intent of the law.  Note, however, they leave out any statutory provision that would lead them to this conclusion.

There is no doubt that this challenge is perhaps the most existential threat to Obamacare and the stakes are high on both sides.  A ruling in favor of the Petitioners here would financially gut the entire law.  Without the subsidies, an estimated 80% of those who purchased insurance on the federal exchange- some 5.4 million people- would be unable to afford insurance.  More people would be without health insurance than before the passage of the ACA.  Prognosticating a ruling is hard.  We are not only dealing with the actual wording of the law itself, but its past in its many guises as well as the regulatory power of the IRS in formulating rules.