Will Text or Context Reign Supreme in King v. Burwell?On March 4, 2015, the Supreme Court of the United States (SCOTUS) will hear King v. Burwell, a lawsuit attacking premium assistance tax credits under the Affordable Care Act (ACA) for those who live in states where the only Obamacare health insurance marketplace is the federal “exchange,” i.e., Healthcare.gov.
The King v. Burwell Dispute: Text vs. ContextBackground: The ACA grants tax credits, based on income level, for individual health insurance purchased in the Obamacare marketplaces, also known as “exchanges.” These credits may be claimed as premium assistance subsidies for a health plan selected by the taxpayer. In 2015’s open enrollment, over 9 million people purchased plans in the federal exchange, and of those about 87 percent, or over 7.5 million, purchased with premium subsidies. The King case questions the legality of these subsidies, and its outcome may determine whether 7.5 million or more taxpayers can continue to purchase insurance.
There are two types of Obamacare marketplaces: state exchanges and the federal exchange. The ACA created the federal exchange for individuals who live in states that refuse or fail to set up their own state exchange. Currently, a total of 37 states do not have state exchanges, and those states’ taxpayers must use the federal exchange.
The King Challengers’ Argument: Premium subsidies are not allowed in the federal exchange. The ACA’s text[1] creating the tax credit only provides for subsidies in “an Exchange established by the State.” The federal exchange has not been established by any state. So, no tax subsidies can be provided in it, and taxpayers who live in the federal-exchange states cannot benefit from subsidies.
The King challengers’ argument is simple: “textualism” is supreme, and the specific statutory text creating the tax credit is controlling!
The Obama Administration’s Response: The text creating the tax credit cannot be taken out of context. The challengers read it myopically, in spite of the ACA’s whole text and meaning, and in disregard of the law’s overall intent.
The ACA provides
every income-eligible taxpayer the right to claim premium subsidies regardless where she resides. The only condition is whether the taxpayer earns between 100 percent and 400 percent of the federal poverty line, nothing more.[2] Furthermore, taxpayers can only use subsidies for “qualified” health plans certified to meet minimum standards.[3] And, only “qualified” plans may be sold in any exchange including the federal exchange. If the ACA’s text really forbade premium subsidies in the federal exchange, no reason would exist for requiring only “qualified” plans to be sold in it.
This is especially true given the sweep of the ACA’s individual mandate which requires every taxpayer to have health coverage or pay a penalty. It would make little sense to subject every resident, in states that use the federal exchange, to potential penalties, yet deprive them of subsidies to buy coverage.
The ACA requires every state to establish an exchange, but if a state refuses or fails to do so, the ACA requires the federal government to establish “such Exchange” for it.[4] The purpose of the federal exchange, as shown by the statute’s use of the word “such,” is to operate as the functional equivalent of an exchange “established by the state.”
To read the ACA’s text in isolation the way the King challengers do would propel insurance markets in states with the federal exchange into a “death spiral.” This occurs when markets cannot attract enough healthy insureds to offset unhealthy ones. Unhealthy people will often pay for health insurance regardless of premium subsidies, but healthy people often will not. Without subsidies, too many healthy buyers will exit the federal exchange, and drive up premiums to unaffordable, unsustainable levels. Congress did not create a law intended to expand coverage to “all” Americans, but at the same time, wreak havoc for insurance markets precluding anyone from buying insurance in federal-exchange states.
Other provisions of the law would be violated, or make little sense, if the King challengers were correct. For example, one section of the ACA permits states to waive certain of the ACA’s insurance market reforms including its provision for premium tax-credit subsidies.[5] But, states seeking waiver must submit a plan for the federal government’s approval showing that a comparable number of state residents would be covered, and even then, the plan cannot last beyond five years without re-approval. If a state could simply refuse to establish a state exchange and, as a result, preclude its residents from benefitting from the premium tax-credit subsidies in the federal exchange, it could achieve by fiat what this waiver section only permits with federal approval. Why would the ACA create a narrow path for states to waive its provisions, but permit a broader path to avoid them altogether?
Finally, the ACA requires meticulous information reporting on premium subsidies, including reports from both federal and state exchanges to reconcile tax credits with income-eligibility and to determine whether any taxpayer received excess subsidies.[6] If premium tax subsidies were never supposed to be available in the federal exchange, no such reports would be needed from the federal exchange. That they are required from the federal exchange clearly reveals the challengers’ reading of the ACA is flawed.
Considered together, all of the ACA’s provisions provide the proper context to understand the specific text relied upon by the challengers. The ACA must be read to permit premium tax-credit subsidies in the federal exchange. To read it otherwise would violate the most basic “textualist” principles, which are to read statutes, whenever possible, so as to give meaning to every provision, and to avoid any reading that results in contradictions or renders certain provisions irrelevant or without purpose. Extra-textual sources of purported intent behind a statute’s meaning are not to be resorted to if at all possible.[7] In King, the context of the entire ACA must reign over any isolated text!
An Ambiguity ‘Tie’ Between Text and Context Goes to ObamaIf ambiguity exists in how to interpret the ACA, and a “tie” exists between competing interpretations of text and context, the Obama administration’s fallback position relies on the precedent of Chevron, U.S.A., Inc. v. Natural Resources Defense Council (1984). Under Chevron, ambiguity in statutory text gets resolved in the courts by deferring to the executive agency charged with the law’s regulation and enforcement. The Internal Revenue Service (IRS) enforces the ACA’s tax provisions, and its regulations permit premium subsidies in the federal exchange. Unless those regulations are stricken as contradictory to text, Chevron deference should tip the scales of justice toward the Obama administration’s interpretation of the ACA’s text.
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[1] 26 USC §36B(b)(2)(A).
[2] See 26 USC §36B(c)(1)(A) which defines who is an “applicable taxpayer.”
[3] See 26 USC §36B(c)(3); see also Patient Protection and Affordable Care Act (PPACA)(Consolidated), Section 1301(a)(1)[18 USC §18021(a)(1)], which can be found at the following website:
http://housedocs.house.gov/energycommerce/ppacacon.pdf , at p. 58.
[4] PPACA (Consolidated), Section 1321(c)(1)(B)(i), which can be found at the following website:
http://housedocs.house.gov/energycommerce/ppacacon.pdf , at pp. 85-86.
[5] PPACA (Consolidated), Section 1332(a)(1), (2) & (4) [42 USC §18052(a)(1), (2) & (4)], which can be found at the following website:
http://housedocs.house.gov/energycommerce/ppacacon.pdf, at pp.98-99.
[6] PPACA (Consolidated), Section 1401(f)(3)(C), (E) & (F) [IRC §36B(f)(3)(C), (E) & (F)], which can be found at the following website:
http://housedocs.house.gov/energycommerce/ppacacon.pdf , at pp. 116-117.
[7] Ironically, the King challengers rely on a few statements made by Jonathan Gruber, an economics professor at MIT, and a purported “architect” of the ACA, to support their position that Congress intended premium tax-credit subsidies to be available only in state exchanges and not the federal exchange. They cite certain Gruber statements suggesting the ACA was intentionally structured to put pressure on the states to create their own exchanges by threatening the states with depriving their residents of subsidies in the federal exchange. The King challengers’ reliance on these purported Gruber statements reveals the weakness of their own interpretation of the ACA’s text, especially since many of the conservative Justices on the Supreme Court would appear to be strong supporters of a purely textualist approach to statutory interpretation.
http://www.acslaw.org/acsblog/will-text-or-context-reign-supreme-in-king-v-burwell
