Symposium: A welcome grant for a straightforward statutory case

Jonathan H. Adler is the Johan Verheij Memorial Professor of Law and Director of the Center for Business Law and Regulation at the Case Western Reserve University School of Law.  He is a regular contributor to the Volokh Conspiracy and is credited (along with Michael Cannon) with outlining the theory upon which the plaintiffs’ claims in King v. Burwell are based.

With Friday’s grant of certiorari in King v. Burwell, the Supreme Court has accepted another high-profile Affordable Care Act case. It is the third such case in four years, and is unlikely to be the last. Whatever the Court decides in King, ACA litigation will continue for years to come.

Most commentators were surprised the Supreme Court took this case. I did not predict it either, but the reasons for the Court’s cert. grant are readily understandable.  In the usual case, the Supreme Court will not grant certiorari in the absence of a circuit split or a standing judgment invalidating a federal law.  But King is not the usual case.

Under Rule 10, one of the reasons for granting certiorari is when a lower court “has decided an important question of federal law that has not been, but should be, settled by this Court.”  While King is a straightforward statutory interpretation case, it unquestionably concerns an “important question of federal law.” Resolution of this case could have a significant impact on the implementation of the ACA, particularly in the three dozen states that have not established their own exchanges. In these states, should plaintiffs prevail, tax credits and cost-sharing subsidies will not be available, the employer mandate will be inoperable (assuming the administration ever allows it to come into force), and enforcement of the individual mandate penalty will be limited.  No one disputes that this makes King an important case.  Indeed, the importance of the legal issue was one of the things highlighted by the federal government and commentators in urging the U.S. Court of Appeals for the D.C. Circuit to hear a companion case, Halbig v. Burwell, en banc.

Why didn’t the Court wait for the D.C. Circuit to decide Halbig en banc? Because King involves straightforward questions of statutory interpretation worthy of more timely resolution.  This litigation creates substantial uncertainty about the operation of the law and, should the plaintiffs’ claims be upheld, policymakers, insurance companies, and those who would otherwise be eligible for subsidies will need time to figure out how to respond.  This is one of the reasons all of the lower appellate courts to consider these claims have expedited their proceedings (at least up until now).  These courts recognized that there are good reasons to treat these cases as more urgent and time-sensitive than the typical case.

Further, while the D.C. Circuit’s decision to rehear Halbig en banc vacated the original panel’s judgment, the Court is aware that this is a question upon which courts are divided.  Two panels on two different circuits reached different conclusions, and even the panel which sided with the government noted the closeness of the issue and was not unanimous in its rationale.  The existence of another decision rejecting the government’s position and the existence of a fourth pending case in yet another circuit could have led Justices to believe this issue was one they would ultimately have to settle.  Combining the time-sensitive nature of the litigation with the reasonable likelihood this issue was destined for the Court eventually provides ample reason to take the case.

It is also possible that the grant of certiorari indicates at least four Justices are skeptical of the decision below.  After all, in the usual case the Court does not grant to affirm. (Again, however, this is not the usual case.)  Why might the Justices be skeptical of the decision below? Because the U.S. Court of Appeals for the Fourth Circuit was at pains to explain away the plain language of the statute.

To recap the question at issue: Section 1311 of the ACA calls upon states to establish health insurance exchanges, and Section 1321 requires the federal government to establish exchanges in states which fail to do so (or fail to enact other mandated reforms).  Section 1401 provides for tax credits for the purchase of qualifying health insurance plans in “exchanges established by the State under Section 1311.”  The challengers in this case argue this means what it says: that tax credits are only authorized in exchanges established by the states.  The government argues that the phrase “established by the State” does not mean that the exchange actually has to have been established by the state because other provisions establish some degree of equivalence between Section 1311 and Section 1321 exchanges and the plaintiffs’ interpretation would undermine the goal of expanding health insurance coverage.

Contrary to what many claim, this is not a case about a single phrase in a single, isolated provision in a gargantuan statute.  The law, read as a whole, with attention to each and every relevant provision, supports the plaintiffs’ case.  No one disputes that, as Justice Antonin Scalia wrote last Term in Utility Air Regulatory Group v. EPA that “the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.”  But we must also remember, as Justice Scalia wrote in that same majority opinion, that agencies may not “rewrite[e] unambiguous statutory terms” nor “revise clear statutory terms that turn out not to work in practice.”  Further, as Justice Elena Kagan wrote for the Court last Term in Michigan v. Bay Mills Indian Community, courts have “no roving license, in even ordinary cases of statutory interpretation, to disregard clear language simply on the view that . . . Congress ‘must have intended’ something” other than what the statute’s text actually says.

The problem with the government’s position is that it requires pretending as if the repeated phrase “established by the State” has no real meaning – as if it is mere surplusage of no relevance to the actual meaning and effect of the law’s provisions — even though it was added in multiple places within Section 1401 at multiple times; even though “State” is defined as the fifty states and the District of Columbia; even though there is language drawing equivalency between territorial exchanges and state exchanges, but no such language for federal exchanges; even though the statute contains no reference to tax credits in federal exchanges, and so on.

The government and its defenders say that no portion of the ACA can be read to deny the availability of tax credits to low-income individuals, yet the ACA indisputably imposes an income floor for tax credit eligibility that means the poorest of the poor get no help from the law in purchasing insurance. They argue that it is implausible Congress would have conditioned an important benefit (tax credits and cost-sharing subsidies) on state cooperation, even though Congress does this all the time, has done this before with health insurance, expressly considered doing this in other draft health care reform measures, and did this within other portions of the ACA.  They claim Congress would not impose guaranteed issue and community rating without providing subsidies for the purchase of insurance, yet the ACA did that in the child-only market. They claim Congress would never have left achievement of the Act’s goal of expanding health coverage vulnerable to state intransigence, yet it did so with Medicaid, just as other cooperative federalism programs enacted by Congress are vulnerable to state intransigence. And so on again. Everything they say Congress would never do, it has done, often within the ACA itself.

Of course the ACA’s supporters hoped tax credits would be available in all fifty states, just as they hoped the Medicaid expansion would be available in all fifty states.  In both cases, they expected states to cooperate. Time and again ACA proponents said states would create their own exchanges.  What no member of Congress ever said during deliberations over the ACA, however, is that there would be tax credits in federal exchanges. Despite years of looking, not a single contemporaneous statement making this simple claim has been found.  That Congress did not anticipate that states might refuse to create exchanges, and did not consider whether the law adequately addressed that potentiality, does not give the IRS or the courts the authority to correct the legislature’s handiwork.  Congress chose to enact what even its supporters recognized was a flawed bill, because there were not enough votes to craft an alternative and because, in their view, a flawed bill was better than no bill.  Most preferred the exchange provisions embodied in the House health care reform bill, but that was not what Congress enacted.

A victory for the plaintiffs would certainly prove disruptive in those states that have refused to establish their own exchanges. How disruptive, though, will depend on how policymakers respond.  University of Michigan law professor Nicholas Bagley has explored potential fixes that might be available should the plaintiffs prevail.  The ACA also contains a waiver provision in Section 1332, effective in 2017, that may provide a means for states to seek tax credits and subsidies without creating their own exchanges.  Finally, some Republicans have endorsed alternative health reform measures that would provide premium assistance for low-income individuals and expand insurance coverage. In other words, both sides may be exaggerating the practical impact of a victory for the plaintiffs in King.

Were this case not about the ACA, it would present an easy and straightforward case of statutory interpretation.  In 2011, when I first made the case that tax credits are only available in state-established exchanges, it was not particularly controversial.  National Federation of Independent Business v. Sebelius had not reached the Supreme Court, most states seemed to be on their way to create exchanges, and no one saw how the claim could be litigated.  Given all that has transpired since, the case has become a proxy battle over the ACA itself, and partisans have lined up based upon their views of the statute.  That should not obscure the simple fact that the law clearly says what it says, that it means what it says, and that if Congress made an error, it is up to Congress to fix it.