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Will concern for states’ rights win out in subsidies battle? Today’s argument in Plain English

After nearly ninety minutes of oral arguments today in King v. Burwell, the challenge to the availability of tax subsidies for people who purchase health insurance on a marketplace created by the federal government, six Justices had tipped their hands.  Justices Elena Kagan, Sonia Sotomayor, Stephen Breyer, and Ruth Bader Ginsburg all seemed like solid votes for the federal government, defending the subsidies, while the challengers could clearly count on the votes of Justices Antonin Scalia and Samuel Alito.  Chief Justice John Roberts – who three years ago joined the Court’s more liberal Justices to uphold another provision of the Affordable Care Act, requiring everyone to buy health insurance or pay a penalty (it’s a tax!) – kept his cards close to his chest, asking only a few questions that gave no real hint as to how he might vote.  But even if it ultimately doesn’t get the Chief Justice’s vote, the government could still win as long as it can pick up just one more vote.  And that seemed like at least a possibility, because Justice Anthony Kennedy asked several questions which suggested that he might be leaning more toward the government than the challengers.  Let’s talk about today’s argument in Plain English.

First up this morning was attorney Michael Carvin.  As I explained in my preview of the case, Carvin’s four clients receive subsidies to help pay for their health insurance.  But they argue that they aren’t actually eligible for the subsidies because the part of the Affordable Care Act which explains how the IRS should determine the amount of their subsidies refers to an exchange “established by the State.” And that, they contend, means that when a state – like their home state of Virginia – declines to set up its own exchange, leaving the federal government to step in, the subsidies are not available for the residents of that state.

Carvin began by telling the Justices that this was a “straightforward case” of interpreting the Affordable Care Act.  Normally, the Justices will give an attorney at least thirty seconds or so to make his opening statement before breaking in with questions.  But after just one sentence, Justice Ruth Bader Ginsburg interrupted Carvin, asking him to address the issue of “standing” – whether the challengers had a legal right to be in court at all.  Carvin emphasized that the challengers only needed at least one person to have that right.  And here, he assured her, that requirement was certainly met:  although one plaintiff was a veteran, for example, he hadn’t served long enough to be eligible for free health care, while another plaintiff who would soon be eligible for Medicare would still have to spend her own money to pay for health insurance for part of the year.

After a back and forth with Ginsburg, Carvin turned to the substance of the question before the Court.  But all four of the Court’s more liberal Justices were skeptical of his interpretation of the Affordable Care Act.  Justice Stephen Breyer, for example, offered a step-by-step reading of multiple parts of the act that would support the government’s interpretation.  Justice Ginsburg characterized the part of the act on which Carvin and his clients rely as a relatively unimportant provision used simply to calculate the amount of the subsidies; if it were actually as significant as the challengers contend, she suggested, Congress would have put it in the main part of the ACA instead.

Justice Elena Kagan echoed Ginsburg’s questioning a few minutes later, telling Carvin bluntly:  “Let’s go back to where Congress put this thing.”  The Court generally assumes, she explained, that Congress will be clear if it is going to do something as weighty as what the challengers are saying it did in this case.  But, she continued, here Congress was sufficiently unclear that it apparently took a year and a half for anyone to notice what the challengers are now saying Congress did.  And the key provision, according to the challengers, was located in a “technical formula” directed at the Department of the Treasury’s calculation of subsidies.  That, she concluded, doesn’t really make any sense.

But what may eventually prove to be the key line of questioning may have been kicked off by Justice Sonia Sotomayor, who expressed concern about the consequences of a ruling for the challengers.  If a state’s residents don’t receive subsidies, she told Carvin, it will lead to a “death spiral”:  because a large group of people in those states will no longer be required to buy health insurance, but insurers will still be required to offer insurance to everyone, only sick people will buy health insurance.  And that will cause everyone’s insurance costs to rise, leading more people to drop out of the insurance market.  States will then feel like they have no choice other than to establish their own exchanges to ward off the “death spiral” – a scenario that is so coercive that it violates the Constitution.

Perhaps critically for the government, Justice Anthony Kennedy – who is often regarded as a strong supporter of states’ rights – also expressed concern about the possibly coercive effect of a ruling for Carvin’s clients.  There is, he told Carvin, “something very powerful to the point” that if the challengers prevail, the states have to choose between the death spiral and creating an exchange.  “There’s a serious constitutional problem,” he concluded.  (Carvin tried to downplay this concern by telling Kennedy that the government had not raised this issue, but Kennedy quickly retorted that “we sometimes think of things the government doesn’t argue.”)

Like Carvin, Solicitor General Don Verrilli – the government’s top lawyer at the Supreme Court – also faced questions about the challengers’ right to sue.  But between his acknowledgement that, as Carvin had asserted, a veteran who had only served a short time would not be eligible for free health care and the lack of certainty about the plaintiffs’ 2014 annual incomes (which would determine whether they would be required to buy health insurance at all), the issue didn’t seem to have much traction with the Justices.

On the merits of the challenge to the subsidies, Verrilli faced repeated questions from Justices Scalia and Alito, who were both obviously skeptical of the government’s arguments.  Scalia pushed back against Verrilli’s argument that the challengers’ reading simply doesn’t work, while – by contrast – the government’s interpretation accounts for the ACA’s structure and design.  The question, Scalia admonished Verrilli, is not what Congress intended; the question is what it actually wrote in the statute.  But in any event, Scalia queried a few minutes later, if the Court were to rule for the challengers, did Verrilli and the government actually expect Congress to “really just sit there while disaster ensues?”  (Based on Verrilli’s response – a dubious “This Congress?” – the answer appeared to be yes.)

Justices Alito and Scalia also contested Verrilli’s assertion that, had Congress actually intended to force states to choose between setting up their own exchanges and depriving their residents of subsidies, it would have done so more clearly.  Scalia asked rhetorically why, because the ACA is “not the most elegantly drafted statute,” would it “be so surprising” if Congress didn’t make the states’ obligations obvious?  Alito added that, if Congress didn’t want to limit the subsidies to the residents of states that had set up their own exchanges, it could have used more precise language to do so – as it did, for example, in making clear that the District of Columbia (which is not a state) nonetheless qualifies as a “state” for purposes of the ACA.

Justice Kennedy’s concerns about states’ rights resurfaced again during Verrilli’s argument, but this time pointing in the other direction.  Responding to Verrilli’s contention that it would not have made any sense for the ACA to include a provision for the federal government to set up exchanges if Congress envisioned that the states would all do so, Kennedy suggested that the fall-back option might have been added so that the states could “show that they had concerns about the wisdom and workability of the [ACA] in the form that it was passed.”  Later on, Kennedy also challenged other aspects of the government’s reading of the statute – for example, he cited the Court’s earlier cases to make the point that, if the IRS is going to allow “billions of dollars” of tax deductions for the subsidies, “it has to be very, very clear.”

Between the near-complete radio silence from the Chief Justice and the sometimes conflicting questions from Justice Kennedy, the case is a tough call.  Overall, the government can probably be cautiously optimistic (but only cautiously), because on net Kennedy’s concerns about the potentially coercive effect of the challengers’ rule seemed to outweigh his qualms about the government’s reading of the statute.  And even if Kennedy does not swing his support to the government in the end, the Chief Justice might remain in play, as he was during the 2012 battle over the individual mandate.  But we probably won’t know until the Court issues its decision later this year; when it does, we’ll be back to explain it all in Plain English.

Recommended Citation: Amy Howe, Will concern for states’ rights win out in subsidies battle? Today’s argument in Plain English, SCOTUSblog (Mar. 4, 2015, 4:50 PM),