at law
Justice Roberts Gets It by Mark A. Hall
D
espite its complexity, the core of the Patient Protection and Affordable Care Act can be nicely understood through the metaphor of a three-legged stool whose balance depends on the strength of each element. The ACA’s central achievement is to make all Americans forever insurable by requiring insurers to cover all who apply, at average community rates, regardless of health risk, and prohibiting insurers from excluding preexisting conditions. This coverage guarantee cannot stand unless people purchase insurance before they need it; otherwise, many people would simply wait to buy until they are sick or injured, and thus insurance premiums would skyrocket. Accordingly, the reform stool’s second leg is the “individual mandate,” which assesses a tax penalty if people decline to enroll in affordable insurance. Premium subsidies administered through insurance exchanges are the third leg; without substantial subsidies, many people could not afford to comply with the purchase mandate. Opponents of the ACA have attempted to topple it in court by challenging the legality of two of these three legs. Three years ago, in NFIB v. Sibelius, Chief Justice Roberts narrowly upheld the constitutionality of the individual mandate, in a 5-to-4 decision that characterized the mandate as an optional tax rather than as a regulatory command. This year, on June 25, the health policy September-October 2015
community exhaled a giant sigh of relief when the Supreme Court upheld the subsidy leg of the ACA structure. In King v. Burwell, Justice Roberts again wrote the majority opinion (this time for six members that included Justice Kennedy), ruling as a matter of statutory interpretation that subsidies for insurance premiums are available not just through state-based exchanges but also through the federal exchange. Legal experts had become increasingly apprehensive that the Court might rule the other way, based on poorly drafted statutory language that authorizes subsidies through exchanges “established by the state”—with no mention here of federal exchanges. Had the Court tipped that direction, the individual insurance markets in over half the states would have been threatened with serious damage, perhaps destruction. Without premium subsidies, the individual mandate loses its effectiveness, and without an effective coverage mandate, the ACA’s guaranteed insurability would cause widespread “adverse selection” (people waiting until they are sick to purchase insurance), potentially leading to a “death spiral” in insurance premiums and to insurers exiting the individual market. This statutory snafu arose because of the hurried way Congress enacted the ACA, when Senator Kennedy’s death caused the Democrats to lose a filibuster-proof majority in the Senate. That
setback forced Congressional leaders to rely on a preliminary bill that the Senate had previously passed but that had not been carefully proofread. (Word to the wise.) Earlier committee deliberations had differed on whether insurance exchanges should be centralized through the federal government or run by the states. The Senate bill that became the ACA crafted a compromise approach that looked first to states to set up exchanges, but then called for a federal fallback in states that declined to do so. Originally, Congress probably expected few states to balk, but as Obamacare became such a hotly contested political issue, most states with Republican leadership defaulted to the federal exchange. All of this matters a great deal because the ACA’s premium subsidies are available only through the exchanges. And in their haste, the Senate drafters mentioned only exchanges “established by [a] state” in the law’s authorization of subsidies. The Internal Revenue Service quickly patched over this glitch by ruling that subsidies are also available when federal exchanges take the place of staterun exchanges. But conservative policy groups seized on the drafter’s oversight by recruiting people who might avoid the individual mandate if subsidies were not available, to challenge the legality of the IRS’s common sense ruling. Many legal experts thought the case would never amount to much, but they were wrong. The three dissenting justices in King v. Burwell argued essentially that, even if “established by the state” was a Congressional mistake, all the courts can do is enforce the language Congress wrote. They must leave it to Congress to fix the error. But that is not how the challengers’ lawyers argued. Betting that the “oops, redo” argument would not carry five votes, they instead conjured an imaginary Congressional purpose, one that lacked any contemporaneous evidentiary support: they reasoned that Congress meant to force states to set up exchanges by intentionally threatening to withhold subsidies if states do not follow through. The Supreme Court majority barely dignified this main line of argument H AS TI N GS C E N TE R RE P O RT
7
with a mention, and then only threequarters of the way through its opinion. Had this been what Congress intended, the Court noted, there would have been little reason to bother with setting up a fallback federal exchange. “Contrary to petitioners’ argument, Congress did not believe it was offering States a deal they would not refuse—it expressly addressed what would happen if a State did refuse the deal.” Rather than waste time on the challengers’ make-weight argument, the Court concluded resolutely, “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.” To flesh out this common sense wisdom, Justice Roberts devoted several pages to a cogent exposition of the ACA’s three-pronged structure. [T]hese three reforms work together to expand insurance coverage. The guaranteed issue and community rating requirements ensure that anyone can buy insurance; the coverage requirement creates an incentive for people to do so before they get sick; and the tax credits—it is hoped— make insurance more affordable. Together, those reforms “minimize . . . adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums.”
With this three-legged structure firmly established, it is then easy to conclude that Congress could not have intended to withhold subsidies from federal fallback exchanges: “The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner.” Justice Roberts subtly, but
8 HASTIN G S C E N T E R R E P ORT
pointedly, quoted the Court’s conservative wing to the same effect, from their dissent in the earlier individual-mandate case. There, at issue was whether, if one part of the statute were constitutionally deficient, should the entire statute fall or only the faulty leg. The conservative dissenters there said the entire ACA should topple, for the very reason that, without all legs in place, “the exchanges would not operate as Congress intended and may not operate at all.” In King v. Burwell, Justice Roberts deftly turned this same logic against the dissenters. Roberts’s analysis provoked an infuriated dissent, written by Justice Scalia. His exasperation on full display, at one point he declared that we “should start calling this law SCOTUScare,” on account of the “somersaults of statutory interpretation” performed in two different cases to uphold the law. Justice Roberts calmly brushed aside this tirade, repeatedly reminding the Court’s conservative wing that, several times previously, they had ruled that the “meaning—or ambiguity—of certain words or phrases may only become evident when placed in context,” that “we must ‘read the words in their context and with a view to their place in the overall statutory scheme,’” and that “our duty, after all, is to ‘construe statutes, not isolated provisions.’” Here, finding a textual hook for Congress’s obvious intent was easy enough for analytical minds as sharp as Roberts’s. He patiently walks the reader through a series of technical, interlocking statutory provisions, including one providing that, where a state fails to establish an exchange, the federal government “shall . . . establish and operate such Exchange within the State” (emphasis added by the Court). “By using the phrase ‘such Exchange,’ [the ACA] instructs the Secretary to establish and operate the same Exchange that the State was directed to establish. . . . In other words, State Exchanges and Federal Exchanges are equivalent.”
Notably, one route the Court did not take was to defer to the judgment of the IRS on what an ambiguous statute might mean. Well-established precedent invited that agnostic option, but the Court resolutely took the bull by the horns: “This is not a case for the IRS. It is instead our task to determine the correct reading.” Had the Court simply deferred to this agency’s interpretation, it might have been possible for a future administration to change the IRS ruling. But this decision slams that door shut. Many people fervently pray that King v. Burwell is the final legal challenge that would substantially undermine the ACA. Sometimes prayers are rewarded, but sometimes not. One additional challenge is still making its way through the lower courts. Led by House Speaker Representative John Boehner, conservative Congressmen argue that, for different technical reasons, the government also lacks legislative authority to pay for cost-sharing reductions that mitigate the impact of high deductibles for lower-income subscribers. Again, legal experts are skeptical, but even if they are wrong, there is reason for hope. By rejecting the statutory challenge so decisively in King, the Court may convince ACA opponents to engage in more constructive policy debate on how to improve the ACA. Certainly, major political elements still wish for its demise, but that is not achievable in the current Congress and presidency. Instead, deliberations over how to repair the statutory glitch if the Court ruled the other way led to some thoughtful proposals for modifications that might well be acceptable. True, political opponents might simply bide their time until the next administration. But meanwhile the ACA will become more established, and its benefits more broadly appreciated. DOI: 10.1002/hast.482
September-October 2015
Justice Roberts Gets It by Mark A. Hall
D
espite its complexity, the core of the Patient Protection and Affordable Care Act can be nicely understood through the metaphor of a three-legged stool whose balance depends on the strength of each element. The ACA’s central achievement is to make all Americans forever insurable by requiring insurers to cover all who apply, at average community rates, regardless of health risk, and prohibiting insurers from excluding preexisting conditions. This coverage guarantee cannot stand unless people purchase insurance before they need it; otherwise, many people would simply wait to buy until they are sick or injured, and thus insurance premiums would skyrocket. Accordingly, the reform stool’s second leg is the “individual mandate,” which assesses a tax penalty if people decline to enroll in affordable insurance. Premium subsidies administered through insurance exchanges are the third leg; without substantial subsidies, many people could not afford to comply with the purchase mandate. Opponents of the ACA have attempted to topple it in court by challenging the legality of two of these three legs. Three years ago, in NFIB v. Sibelius, Chief Justice Roberts narrowly upheld the constitutionality of the individual mandate, in a 5-to-4 decision that characterized the mandate as an optional tax rather than as a regulatory command. This year, on June 25, the health policy September-October 2015
community exhaled a giant sigh of relief when the Supreme Court upheld the subsidy leg of the ACA structure. In King v. Burwell, Justice Roberts again wrote the majority opinion (this time for six members that included Justice Kennedy), ruling as a matter of statutory interpretation that subsidies for insurance premiums are available not just through state-based exchanges but also through the federal exchange. Legal experts had become increasingly apprehensive that the Court might rule the other way, based on poorly drafted statutory language that authorizes subsidies through exchanges “established by the state”—with no mention here of federal exchanges. Had the Court tipped that direction, the individual insurance markets in over half the states would have been threatened with serious damage, perhaps destruction. Without premium subsidies, the individual mandate loses its effectiveness, and without an effective coverage mandate, the ACA’s guaranteed insurability would cause widespread “adverse selection” (people waiting until they are sick to purchase insurance), potentially leading to a “death spiral” in insurance premiums and to insurers exiting the individual market. This statutory snafu arose because of the hurried way Congress enacted the ACA, when Senator Kennedy’s death caused the Democrats to lose a filibuster-proof majority in the Senate. That
setback forced Congressional leaders to rely on a preliminary bill that the Senate had previously passed but that had not been carefully proofread. (Word to the wise.) Earlier committee deliberations had differed on whether insurance exchanges should be centralized through the federal government or run by the states. The Senate bill that became the ACA crafted a compromise approach that looked first to states to set up exchanges, but then called for a federal fallback in states that declined to do so. Originally, Congress probably expected few states to balk, but as Obamacare became such a hotly contested political issue, most states with Republican leadership defaulted to the federal exchange. All of this matters a great deal because the ACA’s premium subsidies are available only through the exchanges. And in their haste, the Senate drafters mentioned only exchanges “established by [a] state” in the law’s authorization of subsidies. The Internal Revenue Service quickly patched over this glitch by ruling that subsidies are also available when federal exchanges take the place of staterun exchanges. But conservative policy groups seized on the drafter’s oversight by recruiting people who might avoid the individual mandate if subsidies were not available, to challenge the legality of the IRS’s common sense ruling. Many legal experts thought the case would never amount to much, but they were wrong. The three dissenting justices in King v. Burwell argued essentially that, even if “established by the state” was a Congressional mistake, all the courts can do is enforce the language Congress wrote. They must leave it to Congress to fix the error. But that is not how the challengers’ lawyers argued. Betting that the “oops, redo” argument would not carry five votes, they instead conjured an imaginary Congressional purpose, one that lacked any contemporaneous evidentiary support: they reasoned that Congress meant to force states to set up exchanges by intentionally threatening to withhold subsidies if states do not follow through. The Supreme Court majority barely dignified this main line of argument H AS TI N GS C E N TE R RE P O RT
7
with a mention, and then only threequarters of the way through its opinion. Had this been what Congress intended, the Court noted, there would have been little reason to bother with setting up a fallback federal exchange. “Contrary to petitioners’ argument, Congress did not believe it was offering States a deal they would not refuse—it expressly addressed what would happen if a State did refuse the deal.” Rather than waste time on the challengers’ make-weight argument, the Court concluded resolutely, “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.” To flesh out this common sense wisdom, Justice Roberts devoted several pages to a cogent exposition of the ACA’s three-pronged structure. [T]hese three reforms work together to expand insurance coverage. The guaranteed issue and community rating requirements ensure that anyone can buy insurance; the coverage requirement creates an incentive for people to do so before they get sick; and the tax credits—it is hoped— make insurance more affordable. Together, those reforms “minimize . . . adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums.”
With this three-legged structure firmly established, it is then easy to conclude that Congress could not have intended to withhold subsidies from federal fallback exchanges: “The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner.” Justice Roberts subtly, but
8 HASTIN G S C E N T E R R E P ORT
pointedly, quoted the Court’s conservative wing to the same effect, from their dissent in the earlier individual-mandate case. There, at issue was whether, if one part of the statute were constitutionally deficient, should the entire statute fall or only the faulty leg. The conservative dissenters there said the entire ACA should topple, for the very reason that, without all legs in place, “the exchanges would not operate as Congress intended and may not operate at all.” In King v. Burwell, Justice Roberts deftly turned this same logic against the dissenters. Roberts’s analysis provoked an infuriated dissent, written by Justice Scalia. His exasperation on full display, at one point he declared that we “should start calling this law SCOTUScare,” on account of the “somersaults of statutory interpretation” performed in two different cases to uphold the law. Justice Roberts calmly brushed aside this tirade, repeatedly reminding the Court’s conservative wing that, several times previously, they had ruled that the “meaning—or ambiguity—of certain words or phrases may only become evident when placed in context,” that “we must ‘read the words in their context and with a view to their place in the overall statutory scheme,’” and that “our duty, after all, is to ‘construe statutes, not isolated provisions.’” Here, finding a textual hook for Congress’s obvious intent was easy enough for analytical minds as sharp as Roberts’s. He patiently walks the reader through a series of technical, interlocking statutory provisions, including one providing that, where a state fails to establish an exchange, the federal government “shall . . . establish and operate such Exchange within the State” (emphasis added by the Court). “By using the phrase ‘such Exchange,’ [the ACA] instructs the Secretary to establish and operate the same Exchange that the State was directed to establish. . . . In other words, State Exchanges and Federal Exchanges are equivalent.”
Notably, one route the Court did not take was to defer to the judgment of the IRS on what an ambiguous statute might mean. Well-established precedent invited that agnostic option, but the Court resolutely took the bull by the horns: “This is not a case for the IRS. It is instead our task to determine the correct reading.” Had the Court simply deferred to this agency’s interpretation, it might have been possible for a future administration to change the IRS ruling. But this decision slams that door shut. Many people fervently pray that King v. Burwell is the final legal challenge that would substantially undermine the ACA. Sometimes prayers are rewarded, but sometimes not. One additional challenge is still making its way through the lower courts. Led by House Speaker Representative John Boehner, conservative Congressmen argue that, for different technical reasons, the government also lacks legislative authority to pay for cost-sharing reductions that mitigate the impact of high deductibles for lower-income subscribers. Again, legal experts are skeptical, but even if they are wrong, there is reason for hope. By rejecting the statutory challenge so decisively in King, the Court may convince ACA opponents to engage in more constructive policy debate on how to improve the ACA. Certainly, major political elements still wish for its demise, but that is not achievable in the current Congress and presidency. Instead, deliberations over how to repair the statutory glitch if the Court ruled the other way led to some thoughtful proposals for modifications that might well be acceptable. True, political opponents might simply bide their time until the next administration. But meanwhile the ACA will become more established, and its benefits more broadly appreciated. DOI: 10.1002/hast.482
September-October 2015
