The Supreme Court has spoken and the Affordable Care Act has once again has survived. The legal issue in King v. Burwell was whether the word “by” in the phrase “Exchange established by the State” found in section 1401 of the ACA should be read, in isolation from and without consideration of the other 414,589 words of the ACA. Exchanges are entities that enroll individuals in health plans and determine their eligibility for tax credits. ACA section 1401 (IRC 36B) authorizes exchanges to determine eligibility for the premium tax credits that make health insurance affordable for millions of lower- and moderate-income Americans. The plaintiffs argued that the phrase “Exchange established by the State” meant that individuals who live in the 34 states served by federally facilitated exchanges were not eligible for premium tax credits. The Internal Revenue Service rule that permitted federally facilitated exchanges to grant premium tax credits, they argued, was thus invalid.
The Senate bill that became the ACA asked the states to set up their own exchanges. The legislation, however, clearly authorized the Department of Health and Human Services to operate exchanges in states that elected not to do so. Moreover, many provisions of the ACA, over 50 by my count, clearly indicated either that federally facilitated exchanges could grant tax credits or that the term “Exchange established by the State” should be read to include federally facilitated exchanges.
Considering these facts, the Court in did what it has long said federal courts should do—it read the statute as a whole. Looking beyond the word “established by the State” to the rest of the statute, the Court concluded that the plaintiffs’ reading of the statute was not the only possible reading, and that the phrase had to be read considering the structure, context, and indeed purpose of the ACA.
Surprisingly, having concluded that the clause at issue was ambiguous, the Court did not rely on Chevron deference to the IRS as had the Fourth Circuit. The Court rather pointed to other provisions of the statute that make little sense of federally facilitated exchanges cannot award tax credits, to the clear intent of the ACA that federally facilitated exchanges take the place of state-operated exchanges where states opt for them, at the devastating consequences that would result from a holding for the challengers, and at the fact that Congress would not have buried this important a limitation of the operation of the ACA deep in the formula for calculating the amount of tax credits. It thus resolved the statutory ambiguity itself, upholding the IRS rule. (The Courts’ refusal to rely on Chevron may be important as it means a future administration cannot simply change the rule).
Justice Scalia, writing for himself and Justices Alito and Thomas, was predictably outraged, denouncing the decision as “interpretive jiggery-pokery” and “Pure applesauce” and claiming we should rename the ACA “SCOTUScare” after the Court saved the law twice. But he wrote for 3 judges, not for 6.
The decision affirming the IRS rule has several ramifications. First, and most importantly, it means that the 6.4 million residents of federally facilitated exchange states who can currently afford health insurance because of the ACA premium tax credits will continue to receive them. The individual insurance markets of the 34 federally facilitated exchange states, which were threatened with premium increases of 50 percent which would have driven 70 percent of enrollees from those markets by 2016 are now safe. Hospitals in the FFM states are saved from the tsunami of uncompensated care they would have faced had the plaintiffs won and the number of uninsured jumped dramatically. The fate of the ACA now rests where it should—with Congress and with the American people who will choose a president in 2016 who will set the course for the future of health care reform.
But second, the Court’s decision should send a message to the lower courts that it is time to start bringing down the curtain on politically-based ACA litigation. ACA opponents, frustrated by the repeated failure of their attempts to repeal the law, have filed dozens of cases challenging the law over the half decade that it has been in effect.
One of these cases—NFIB v. Sebelius—succeeded in crippling the ACA’s Medicaid expansion in over 20 states. In recent months, however, the federal appellate courts have dismissed a string of ACA challenges, some on the merits but most on standing grounds. Just because an individual or organization has a political grievance does not mean that they have a “case or controversy” sufficient to establish federal jurisdiction. Going forward, it is to be hoped that the lower courts will read the Supreme Court’s decision as a signal that the courts should leave to Congress and the President the responsibility for changing the law, should they choose to do so.