“Congress Passed the Affordable Care Act to Improve Health Insurance Markets, Not to Destroy Them”

Chief Justice John Roberts’ opinion in King v Burwell, which upholds health insurance subsidies for all eligible Americans regardless of where they live, virtually ends with the sentence quoted in the title of this essay. It is a declaration that brings to a close a 4-year epic journey of litigation designed to bring down the Affordable Care Act (ACA).

King was actually just one of a cluster of cases mounted simultaneously in several federal circuits across the United States, much in the way that NFIB v Sebelius,¹ which tested the underlying constitutionality of the ACA, was the product of multiple litigation challenges to the law. Unlike NFIB, King was not designed to overturn the ACA on constitutional grounds. Instead, the litigation sought to cripple the law’s ability to operate, by barring access to federal premium subsidies that are a crucial part of an “interlocking” (in the words of the Chief Justice) statutory scheme designed to make health insurance accessible and affordable for millions of Americans without employer coverage and ineligible for public insurance.

The plaintiffs in King were 4 Virginia residents (Virginia being a federal Exchange state) who were opposed to insurance but who faced tax penalties if they did not buy it because their subsidies made coverage legally affordable. Potentially facing tax penalties for failure to purchase legally affordable coverage, plaintiffs seized on 4 words in a 1,000-page statute to make their case. These words do not describe the subsidy entitlement provision itself; instead, they appear in the context of how monthly subsidy payments are to be calculated (ie, in relation to the cost of coverage purchased through an “Exchange established by the state”). Ignoring the rest of the law, the plaintiffs argued that the plain meaning of the words “established by the state” precluded access to subsidies in federal Exchange states.

Given that the federal Exchange is in operation in most states,² the impact of the plaintiffs’ claims would have been profound. Eighty-six percent of the 11.7 million people covered through marketplace health plans receive subsidies, and of those with marketplace plans, 8.8 million live in one of the 37 states potentially affected by a ruling favoring the plaintiffs,³ given the absence of a clear definition of what it means for an Exchange to be “established by the state.” The Rand Corporation estimated that without subsidies the number of people with insurance through the federal marketplace would fall by over 70%, and the loss of millions of younger and healthier enrollees would cause premiums to jump by 47% for those who remained. Insurers would face a death spiral and exit the federal Exchange states, leaving millions without employer insurance or public coverage without access to any coverage pathway.⁵

The central legal question of this landmark case became what did Congress intend by “established by the state.” The King plaintiffs lost initially when the trial court concluded that Congress intended to give subsidies to all who qualified, not just those residing in states with their own Exchanges. On appeal, the Fourth Circuit Court of Appeals (which sits in Richmond, Virginia) relied on traditional rules of statutory construction⁴ and concluded that the terminology was ambiguous and that it would therefore defer to the authoritative administrative agency (in this case the Internal Revenue Service [IRS]), which by regulation, had declared subsidies available in all states. Having lost on appeal, the King plaintiffs sought Supreme Court review; in November 2014 the Court agreed to hear the case.

At the outset of his succinct opinion, joined by Justices Kennedy, Breyer, Ginsburg, Kagan, and Sotomayor, Chief Justice Roberts made clear not only the Court’s full understanding of how a reformed insurance market works but also the Court’s intention to decide matters for itself rather than deferring to a federal agency. For the Chief Justice, the question was not whether the IRS had gotten the law right but whether the Court itself should understand the law as extending subsidies to all qualified individuals regardless of where they lived. For the Roberts Court, King represented one of those “extraordinary” cases in which the courts do not do the customary by deferring to the executive branch but instead step in directly to say what the law means. According to the Chief Justice, direct judicial intervention was appropriate in light of the “deep economic and political significance” of the ACA, coupled with the fact that the IRS has “no experience crafting health insurance policy” of the complex sort found in the ACA.

Having established the primacy of the Court in deciding what the law means (a positioning of the Court that dates back to 1803, in Marbury v Madison),⁶ the Chief Justice concluded that while the phrase “established by the state” is ambiguous, the ACA, read in its full context, makes clear that subsidies are integral to the law’s operation. Without subsidies, the market reforms cannot work because without affordable insurance, the ability to pool risk is lost. Thus, when viewed as a whole, the ACA is designed to make subsidies available in all states regardless of who establishes the Exchange through which affordable plans are purchased. Under the ACA, all Exchanges, in the Court’s view, possess the same capabilities and responsibilities. Furthermore, the law itself makes clear that Congress gave states the ability to decide for themselves whether they would develop their own marketplaces. To hold otherwise would be to undermine the very structure of the law, leaving millions of Americans without the ability to establish their subsidy eligibility, simply because they lived in a state that had chosen a pathway to coverage for their residents other than by establishing their own marketplaces.

In his furious dissent, read from the bench on behalf of himself and Justices Alito and Thomas, Justice Scalia argued that the Court had violated a basic tenet of statutory interpretation, setting aside words in their plain meaning in order to arrive at a result intended by the Court rather than Congress. For this reason, he noted, the ACA had ceased being an act of Congress and had devolved into “SCOTUScare,” an invention of the judicial system.

Going forward, the question is whether King ends the overpowering role of the judiciary in implementing the ACA. To be sure, the Act’s complexity will spawn litigation over the meaning of its provisions for years to come. But with its constitutionality secure and its ability to function nationally established, the ACA hopefully can move forward, unfolding over time as have other major US health laws. Of course, the end of blockbuster litigation does not mean an end to the controversy over the ACA. Calls for its repeal resumed as soon as the decision was handed down, and the 2016 presidential election landscape will be shaped by its existence. But for now at least the ACA joins the pantheon of other federal health insurance laws as part of the legal DNA of the nation’s health insurance system.

References

1. 132 S.Ct. 2566 (2012)
2. At the time of the oral argument, 34 states relied on the federal Exchange. Since this time, both Pennsylvania and Delaware have had their state Exchange blueprints approved.
3. Pear R. 86 percent of health law enrollees receive subsidies, White House says. New York Times. March 10, 2015. http://www.nytimes.com/2015/03/11/us/11-7-million-americans-have-insurance-under-health-act.html?_r=0). Accessed June 26, 2015.
4. Saltzman E, Eibner C; Rand Corporation. The effect of eliminating the Affordable Care Act’s tax credits in federally facilitated marketplaces. http://www.rand.org/pubs/research_reports/RR980.html. Accessed June 26, 2015.
5. Chevron USA v Natural Resources Defense Council, 467 U.S. 837 (1984)
6. 5 U.S. 137 (1803)

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