Here are my thoughts on the Supreme Court’s decision on June 25,
2015, in King v. Burwell. In that case, the Court ruled that tax subsides
are available to those purchasing health insurance on both (1) exchanges set up
by a state itself, and (2) exchanges set up by the federal government for a
state. I agree with the Court’s ruling. While I believe reasonable
minds can differ in this case—something that is virtually always true when the
decision is 6 to 3—I think the majority has the better argument, and by a good
margin.
It will be difficult for me to write a summary of the case that
digs deeply into the substance without almost rewriting the various opinions in
full. That is because complex statutory interpretation cases, like
complex contract interpretation issues, come down to the weight of the evidence
taken as a whole. There are numerous relevant categories of evidence in
these types of lawsuits. And there are often multiple pieces of
evidence from each category. That is certainly true in King v.
Burwell. As a result, any true summary that I could write would leave out
critical detail. Given that, and for reasons of time, I am going to
summarize the opinions in more general terms and include selected arguments for
each side.
Before getting to those thoughts, however, let me note that
statutory interpretation is not rocket science. And it does not take a
law degree to understand the basic concepts, even if it does take such a degree
to capture some of the deeper nuances. Accordingly, given that the case
is not that long, those nonlawyers (and lawyers) deeply interested in this
matter ought to consider reading the case in full rather than relying solely
upon my assessment below. The opinion is available here on
the Supreme Court’s website.
Now, to business. The Affordable Care Act says that tax
subsidies are available to those people who buy health insurance on an exchange
“established by the State.” Given that the statute defines “State” to
mean the 50 states and some territories, there is a good case that the
four-word phrase “Established by the state” means that a person may only
receive tax subsidies if the person buys insurance on a state exchange; those
purchasing on a federal exchange may not receive the subsidies. However,
the single most important principle in statutory, contractual, and
constitutional interpretation is that language must be read in context.
And the full context of the statute creates a powerful argument that
“established by the State,” as used in the relevant provision, does not rule
out subsidies on federal exchanges. Indeed, Chief Justice Roberts
marshals multiple types of arguments to make a compelling case that the tax
subsidies apply to both state and federal exchanges, including (1) textual
arguments (a close reading of the text), (2) structural
arguments (analyzing the relationship of textual provisions throughout the
statute), (3) purposive arguments (assessing the purposes or
goals of the act, as reflected in both the language of the statute and material
from outside the statute—called “extrinsic evidence”—such as legislative
history), and (4) consequential arguments (focusing on the
consequences of various interpretations and how those consequences match up
with the language and purposes of the statute).
For an example of a close textual reading, the statute provides
that if the state chooses not to set up an exchange, the federal government
“shall . . . establish and operate such Exchange within
the state.” (Emphasis added.) Roberts argues that this means
that federal exchanges essentially stand in for state exchanges and should be
treated in the same manner for many purposes. In other words,
Roberts is saying that the words “such exchange” support the conclusion that
any federal exchange just is a state exchange (for many
purposes).
For an example of a structural reading, Roberts points out that if
tax subsidies are only available on state exchanges, then there will be no individuals
who meet the tax subsidy eligibility standards in states with a federal
exchange. But, Roberts continues, the statute “clearly contemplates” that
there will be qualified individuals for every exchange
because all exchanges must make available health plans
for qualified individuals. How can an exchange make available health
plans for qualified individuals if there are no qualified
individuals for that exchange? To put this argument in broad terms,
Roberts is arguing that between the two readings of “established by the State,”
one creates a conflict with other language in the statute and one
doesn’t. Consistent with long-established canons of statutory (and
contractual) interpretation, it is better to chose the reading that avoids the
conflict—the reading that allows subsidies for the federal exchanges.
Here is an example of an argument that combines structural,
purposive, and consequentialist reasoning. First,
some basic principles. The guaranteed issue provision
requires that insurance companies provide insurance to anyone who requests to
buy it regardless of preexisting conditions. The community
rating provision requires that everyone be charged largely the same
price for health insurance regardless of their health condition. And
the individual mandate provision requires that everyone own
insurance or pay a tax/penalty. Roberts argues that these provisions
will not work together as intended by the Affordable Care Act if the tax subsidies
are not available on federal exchanges. That is because, without the
subsidies, many people cannot afford to buy insurance on the exchanges.
Most of those people will then be exempt from the individual mandate under one
of the exceptions in the law and thus need not buy insurance. Next, if
the healthy people in that group do not buy insurance and the sick people do (a
very likely occurrence), that will raise premiums, pricing more healthy people
out of the market. Finally, as more people are priced out of the
market, insurance will become even more expensive, creating a feedback loop
that Roberts calls a “death spiral.” That feedback loop will defeat
essential purposes of Obamacare reflected throughout the statute.
Roberts makes other powerful arguments. In fact, I agreed
with almost every point he made. I do believe he overstated his case in a
couple of places. But overall, his arguments—and responses to the
dissent’s arguments—were excellent.
Turning to the dissent, Justice Scalia presented a number of solid
points. But unlike Roberts, he also makes a number of unpersuasive
arguments; and he overstates in multiple places.
Scalia makes more than a dozen distinct arguments in the
dissent. But I think three stand out from the others as strong bases
for his position.
First, Scalia contends that the words “exchange established by
the State” will have no meaning in the provision in question if that
provision applies to both federal and state exchanges. Such a result
violates the canon of interpretation that all words in a legal text should be
given meaning, if possible. But I called this a “canon” for a
reason. It is not a rule. It is just one, albeit important, factor
to consider when interpreting legal language. Moreover, the canon may not
even apply here. Remember that Roberts essentially argues that
“established by the State” incorporates the federal
exchanges due to other language (e.g., “such exchange” discussed above).
That would mean the three highlighted words do have
meaning—just not their ordinary meaning.
Second, Congress chose to use the word “exchange” in some places
and the phrase “exchange established by the State” in
others. That suggests that “exchange” and “exchange established
by the State” have different meanings. Point for
Scalia. This is one of Scalia’s strongest arguments, if not the best.
Third, Congress wrote that if a territory establishes an exchange
(e.g., Puerto Rico, Guam, or the U.S. Virgin Islands), it shall be treated the
same as if a state established the exchange. Why didn’t Congress do the
same with respect to exchanges established by the Federal Government?
Another good argument for Scalia. However, Roberts essentially argues, in
response, that Congress did not need to craft a similar provision for federal
exchanges because the phrase “such Exchange,” discussed above, obviated the
need to do so.
These three points, when mixed with a couple of other decent
arguments Scalia offers, are simply not sufficient to overcome the much larger
collection of persuasive arguments that Roberts presents.
As I said, Scalia also makes some unpersuasive arguments
throughout his dissent. Here are three examples.
First, Scalia writes that it would be “hard to come up with a
clearer way to limit tax credits to state Exchanges than to use the words
‘established by the State.’” This is false. In fact, it is
actually quite easy to come up with stronger language. Scalia fails
to see this because he ignores a basic and recognized principle in both
statutory and contract drafting: If your goal is to exclude something,
it is always more effective to exclude that thing expressly than
it is to implicitly exclude it by simply leaving that
thing out of a list of what is included. And
failing to follow this rule has cost legislatures and contracting parties in
more cases than I can count. Given this principle, here are three
examples of how the language could more clearly have prohibited subsidies on
the federal exchanges:
1. “. . . exchanges established by the State,
excluding those created by the Secretary of Health and Human Services,”
2. “. . . exchanges established by the State
pursuant to [the section setting forth the precise manner in which state
exchanges are created] and not pursuant to [the section setting forth the
precise manner in which federal exchanges are created]
3. “. . . exchanges, except those established
by the Secretary of Health and Human Services.”
All of these are clearly superior to the current wording in the
statute, if the goal is to establish that tax subsidies do not apply to federal
exchanges.
Second, Scalia essentially argues that “established by the State”
must have the same meaning in each provision in which it is used in the
act. And if the four words are ignored when it comes to tax subsidies,
the same must be true elsewhere. This is incorrect. It is
indisputable that the same language can, and often does, mean different things
in different contexts, even within the same statute or contract.
The fact that the same phrase is used in two places in a law or contract is
important evidence that the meaning is the same. But it is not the stringent
rule that Scalia suggests. Moreover, Roberts is best read as not
actually arguing that the words mean something different in the relevant
provision. Instead, he is arguing that the provision, when read in
context, does not exclude tax subsidies from federal exchanges because federal
exchanges are supposed to be treated the same as state exchanges (at least for
this purpose).
Third, according to the majority, if the tax subsidies are not
available, then certain other provisions in the law would make little
sense. Scalia responds by saying that this only shows “oddity, not
ambiguity.” But here Scalia misses the point. Oddity is precisely one
of the bases that counts in favor of rejecting an interpretation. Scalia
is correct that oddity and ambiguity are two different things. But the
odder the result of an interpretation, the weaker that interpretation is.
Scalia continues by saying that laws often have unusual or mismatched
provisions. But when an interpretation leads to an usual result or a
mismatch of two sections of a statute, that counts against the
interpretation. This result flows from multiple canons of
construction, including (1) the preference for reasonable interpretations, (2)
the preference for interpretations that are consistent with the principal
purpose of a law, and (3) the canon that provisions should be read in harmony
if possible.
Let me end by noting that King v. Burwell is a rather run-of-the
mill case on statutory interpretation. The opinions reflected some
of the basic divisions among the members of the Court (and among lawyers and
law professors more generally) regarding the appropriate method for
interpreting statutes (and contracts and constitutions). But both
Roberts’s majority opinions and Scalia’s dissent were perfectly normal Supreme
Court opinions addressing a perfectly mundane case (from the perspective of
statutory interpretation). Yes, this case had high political
salience. Thus, the attention it will get and the rhetoric it will spawn
is going to be abnormal. Indeed, Scalia’s dissent is filled with
sky-is-falling rhetoric. But that is rather common in dissents in cases
like this—cases with high political salience. Had Roberts and Kennedy
sided with the Conservatives, I am rather sure that one of the four Liberals
would have used similar rhetoric in dissent, much like Ginsburg (wrongfully)
did in the Hobby Lobby/religious accommodation case. In short,
do not believe any statements that this case has “fundamentally altered our
constitutional order” or any other such hyperbolic nonsense. This was a
typical statutory construction case, quite similar to the statutory and
contract interpretation disputes American courts handle every day.
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