King v. Burwell Decision Release

By Zara Day, Senior Policy Associate, CRD Associates

I. Introduction

On June 25 the Supreme Court ruled in King v. Burwell that subsidies should continue to be made available in states with Federally-run healthcare exchanges.  The decision allows six million Americans living in the thirty-four states with Federally-run exchanges to keep their insurance.  It also, as Chief Justice Roberts writes, protects against the insurance “death spirals” (prevalent in the 1990s) that the Affordable Care Act (ACA) sought to prevent.

This 6-3 decision paired the liberal wing of the Court (Justices Ginsburg, Breyer, Sotomayor, and Kagan) with Chief Justice Roberts and Justice Kennedy, who was in the minority the last time the ACA reached the Supreme Court.  Importantly, the decision emphasizes the context of the language at issue, and the Chief Justice walks through the history of the Affordable Care Act and the substantial effect of the subsidies on the efficacy of the Act in its entirety.

II. Issue

This case centered around six words, their context, and their interpretation.  The Act allows tax subsidies for taxpayers enrolled in insurance plans through “an exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.”  Plaintiffs contended that this language precluded the IRS from providing tax credits in states with Federally-run healthcare exchanges.  They argued that this language should be read as “an Exchange established under the state,” and consequently that the exact language explicitly precluded individuals from receiving tax credits in states where the Exchange was set up by the Federal government. 

Significantly, the Court relied heavily on the contextual significance of the aforementioned phrase, and of the overall role of the subsidies in ensuring the effectiveness of the Affordable Care Act.  The Chief Justice highlighted the history of insurance and healthcare reform in the United States, emphasizing the necessity of including tax subsidies in order to prevent against the insurance “death spirals” which were extremely prevalent in the 1990s.  The Chief Justice discussed the modeling of Affordable Care Act after Massachusetts healthcare laws, which combine guaranteed issue and community rating requirements with tax subsidies to ensure that healthcare costs stay low and that enough healthy individuals have insurance to balance out costs associated with unhealthy and unwell patients.  Eliminating tax subsidies in states with Federally-run exchanges would topple the infrastructure of this system. 

Prior to reaching the Supreme Court, the Federal District Court found the language above unambiguous, and held against the Plaintiffs.  The Fourth Circuit Court of Appeals held that the language was ambiguous and deferred to the IRS’ interpretation, allowing the subsidies to remain in states with Federally-run exchanges. 

III. Holding

The majority held that, despite ambiguity created by the aforementioned language, tax credits are allowed “for insurance purchased on any Exchange created under the Act.”  The Court determined that the existence of the tax credit is central to the intention and purpose of the law.  The Plaintiff’s interpretation, they say, “turns out to be ‘untenable in light of [the statute] as a whole.’”  The Chief Justice warns that reliance on context in statutory interpretation calls for “great wariness,” but nevertheless finds that this case warrants it.  Notably, the majority opinion concludes as follows:

In a democracy, the power to make the law rests with those chosen by the people. Our role is more confined—“to say what the law is.” Marbury v. Madison, 1 Cranch 137, 177 (1803). That is easier in some cases than in others. But in every case we must respect the role of the Legislature, and take care not to undo what it has done. A fair reading of legislation demands a fair understanding of the legislative plan.

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. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.

V. Dissent

Justice Scalia wrote a scathing dissenting opinion, joined by Justices Alito and Thomas.  In it, he notably analogizes the majority’s rationale to “interpretive jiggery-pokery,” and in his conclusion determines that, “we should start calling this law SCOTUScare.” 

VI. Implications
In addition to the broad implications of this decision, which as noted above will allow six million Americans to keep their health insurance, the text of the decision may have other wide-reaching effects on the interpretation of the Affordable Care Act.

It is worth noting that the Supreme Court chose not to defer to the IRS’ interpretation of the statute, breaking from the Fourth Circuit’s rationale.  Agency deference could have provided an easy solution for the Court, but would have made for easy dismantling of the Act under a new administration.  In regards to this issue, the Chief Justice called King v. Burwell an “extraordinary case” where there is “reason to hesitate” before agency deferral.  He notes:

The tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people.  Whether those credits are available on Federal Exchanges is thus a question of deep ‘economic and political significance’… This is not a case for the IRS.

The Court has made it more difficult for individuals to bring Constitutional claims regarding the Affordable Care Act in the future, emphasizing an interpretation of the Act with attention to its original intent.  Though the Chief Justice highlights “more than a few examples of inartful drafting,” he nevertheless emphasizes the importance of deferring to the intent of Congress in enacting this law.

This decision also removes much of the impetus for states to run their own health exchanges, and may result in more states adopting Federally-run healthcare exchanges.  The existence of more Federally-run exchanges could affect advocacy on healthcare issues substantially by potentially allowing for more stakeholder engagement and advocacy.

Lisa Ellington

Big Thinkery, LLC, 1011 Kenilworth Court Northwest, Concord, NC, 28027