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Argument preview: Now, the third leg of the health-care stool

At 10 a.m. Wednesday, the Supreme Court will hold oral argument on the latest legal challenge to the Affordable Care Act, the new federal health-care law.  The oral arguments in King v. Burwell will feature two high-profile lawyers, Michael A. Carvin of the Washington, D.C., law firm of Jones Day, for the challengers, and U.S. Solicitor General Donald B. Verrilli, Jr., defending the subsidy system designed to help millions of consumers afford health insurance.   The hearing is scheduled for one hour, but it may be allowed to run longer, especially since no other cases are up for argument that day.


Five years ago, when Congress finished writing nearly a thousand pages that would become the new national health-care law, it was well aware that the finished product would be subject to strong challenges.  The Affordable Care Act was passed in both houses with not one Republican lawmaker voting for it.  The day after it passed, Republicans introduced a bill to repeal it.  The House has since voted some sixty times for repeal.

Still, the law remains on the books, while controversy goes on, and the Supreme Court has now allowed itself back into the middle of the dispute, for the second time in three years.

Backers of the bill have always said it had three interlocking parts that were vital — sometimes referred to as the three legs of a stool.  The stool metaphor, they said, was apt: cut off any of the legs, and the thing would collapse.

One leg was not controversial with many people: insurance companies could no longer deny coverage or hike premiums just because a person had existing problems — heart disease, for example — or a past history of such problems.  Insurers, though, were heavily involved in writing the new law, and they were being assured a nationwide pool of customers for their business.

Another leg, to insure that there would be that nationwide pool, was a mandate that every individual in the country would have to buy health insurance or else pay a financial penalty with their tax return.  That was the leg that challengers singled out three years ago, but a Supreme Court majority found a way to reinforce that leg constitutionally.

The third leg — the one now under challenge in the Court — created a system of tax credits, or subsidies, to enable middle- or lower-income people to afford health insurance.  It would be available to individuals who did not have coverage through their jobs, and could not qualify for Medicare or Medicaid.  They would shop for insurance on marketplaces (formally, “exchanges”) set up in every state, offering a smorgasbord of supposedly affordable insurance plans.

If that leg is cut off, the supporters of the ACA have always argued, it would set off a “death spiral” — death, here, in an economic sense.  Unable to afford health insurance without a subsidy, millions of healthy people would lose their policies, and the shrinking of the healthy consumer pool would lead insurance companies to escalate premium prices — spiraling into the death of the ACA.

The size of that threat may already be clear: in the latest sign-up period for health insurance under ACA, some 11.2 million Americans sought coverage, and eighty-seven percent of them did so with the support of a subsidy.

That third leg was so important to the entire enterprise, it seemed, that the Supreme Court agreed to rule on its legality even when there was then no split among lower courts on that question.  One might suggest that at least some of the Justices were eager to confront the issue.

In fact, the Court’s agreement to hear the case of King v. Burwell on November 7 has become part of a narrative that has dominated the nation’s news reporting on the case ever since.  That narrative’s theme is that the third leg of the stool is under a very serious threat, and probably won’t survive the Justices’ review.

Much of the political commentary, running up to the Court’s hearing on Wednesday, has sounded as if the issue were already settled, that the ACA was dead, or — at best — on life support.  In fact, a committee of the House of Representatives asked the Obama administration recently whether it had any plans to deal with the demise of the ACA at the hands of the Supreme Court, and the top health official in the government — Health and Human Services Secretary Sylvia M. Burwell — wrote back with the dire word that it had no such contingencies in mind, and would offer none.

The Supreme Court, of course, will not begin working on an actual decision in the case until it goes on the bench at 10 a.m. Wednesday to hear the lawyers argue the case that carries Secretary Burwell’s name.  It will be argued by the government’s top Supreme Court advocate, and by one of the lawyers who had appeared before the Court for challengers when the ACA was last on the Court’s docket.

When the hearing unfolds, the focus will be on what Congress had intended in 2010 when it created the subsidy system, along with the system of exchanges — the only place where one can buy health insurance, under the ACA, with the help of a subsidy from the government.   There are policy arguments, on each side, but this is fundamentally a contest about how to read a federal statute.

This is not a constitutional controversy, although it has overtones of the fundamental debate that has gone on intensely throughout history over federal-state roles under the founding document.

At its core, the dispute is really quite simple.  The challengers note that Congress said the subsidies would be available on exchanges “established by the state,” so the outcome of the case should turn on those four words, as well as what they imply about Congress’s design of the system.  The government counters that this is a big and complex law, with a purpose of setting up a nationwide system, and many parts of the law’s content point to a universal system of exchanges operating within the subsidy system.  Focusing on just the language of the law, each side can cite some words with a “plain meaning” in support of their view.

The difference between those two positions is not just one of semantics.   That’s because of how exchanges got established when the ACA went into effect.

Sixteen states created their own exchanges.  No one disputes that consumers who shop in those states are eligible for subsidies.  But the other thirty-four states chose not to set up an exchange and, under the ACA, the federal government stepped in and set one up for each of those states.  The challengers’ view is that subsidies are not available in those thirty-four states, that Congress said what it meant.   The government says they are, that Congress wanted a nationwide system, not a patchwork.

No one disagrees about the effect of this difference: the ACA will not work with just a sixteen-state system of exchanges with subsidies.

The merits briefs by the two sides seek to enlarge the discussion beyond the actual words in the ACA.

The challengers contend that Congress was intent on giving the states the primary choice, and it used the subsidy system as an incentive to get them to go along; it has to accept the prerogative of some states not to take the bait.  And, the challengers have a variety of arguments about why Congress did not intend to leave the scope of the subsidy and exchange system up to the Internal Revenue Service — the government agency that actually wrote the rule saying that subsidies would be available in all fifty systems, no matter who created exchanges.

The government argued that the structure and design of the system make nationwide subsidies necessary to make the insurance policy reforms in the ACA work as intended, and to make the cooperative federal-state program function as planned.  And the federal brief contended that the system is not like one in which the government hands out money to states with conditions attached, but rather are a federal benefit extended to federal taxpayers.  As a backup argument, it contended that the view the IRS takes of the law’s scope is at least a permissible one, so the Court should defer to that agency’s expertise.

As with many high-profile cases with deep potential consequences, King v. Burwell has attracted a stack of amicus briefs on both sides.

The challengers’ amici are, for the most part, conservative or libertarian advocacy groups, along with six states, and fifteen members of Congress.   Some of the advocacy groups’ briefs seek to turn the case into a referendum on whether President Obama and his administration have overreached in their enforcement of government laws and policy in general.  There are just short of two dozen of these briefs on that side.

The government draws the support of twenty-two states, along with liberal and civil rights advocacy groups, a host of health and health insurance industry groups, members of Congress and state legislatures, and labor unions.  Many of these groups’ briefs seek to warn the Court of the serious negative effects that they see following a decision against the government.   There are just under three dozen amici on that side.





Recommended Citation: Lyle Denniston, Argument preview: Now, the third leg of the health-care stool, SCOTUSblog (Mar. 1, 2015, 12:04 AM),