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Supreme Court justices split in key challenge to Obamacare subsidies Supreme Court justices split in key challenge to Obamacare subsidies
(about 5 hours later)
Supreme Court justices split along ideological lines Wednesday in questioning during the latest legal battle over the Affordable Care Act, making the outcome difficult to predict. Supreme Court justices split along ideological lines Wednesday in a dramatic but collegial showdown in the latest legal battle over the Affordable Care Act, with the outcome difficult to predict.
Chief Justice John G. Roberts Jr., who saved the act from a constitutional challenge three years ago, this time asked no questions that would betray his thoughts. If President Obama could draw hope from the 1 hour and 25 minutes of debate about his signature domestic achievement, it would be because of Justice Anthony M. Kennedy. Three years ago, Kennedy was among the four dissenters who would have found the entire act unconstitutional. But Wednesday, with his comments and questions seeming to cut both ways, he appeared to be back in play.
If there was a reason for optimism for the Obama administration, it came from Justice Anthony M. Kennedy. Kennedy, a potential swing vote, questioned whether the challengers’ reading of the law — that federal tax subsidies should only be available in the 16 states and District of Columbia that have set up their own insurance marketplaces — would cause “serious constitutional problems” of coercion. The outcome could also hang on Chief Justice John G. Roberts Jr. He wrote the opinion saving Obamacare from a constitutional challenge in 2012, but he was inscrutable this go-round, asking no questions that would provide a clear reading of his inclinations.
[Highlights from oral arguments][Highlights from oral arguments]
Kennedy told Washington lawyer Michael A. Carvin, representing the challengers, that there was “something very powerful” about the government’s argument that denying subsidies to those in states where federal authorities have set up the exchanges would lead to a host of problems at odds with the goals of the law. At issue in the current case is whether millions of Americans who receive tax subsidies to buy health insurance are doing so illegally. The challengers say a straightforward reading of the law means the credits are available only for those who buy insurance on marketplaces, called exchanges, that are “established by the state” rather than on a federal marketplace.
At issue in the case — the most serious challenge to the law since the justices upheld it as constitutional in 2012 — is whether millions of Americans who receive tax subsidies to buy health insurance are doing so illegally. If the justices rule that the payments are not allowed, the entire health-care law could be in jeopardy. The subsidies are a linchpin in the program to require Americans to buy health insurance. A ruling against the administration would have adverse consequences for an estimated 7.5 million Americans who now receive subsidies in the 34 states where authorities have declined to establish their own exchanges.
The latest showdown between the Obama administration and the conservative legal strategists who have targeted the law since its passage in 2010 focuses on a once obscure phrase in the legislation: “established by the State.” Those questions about dire consequences for the states seemed to most concern Kennedy, the court’s leading advocate of federalism.
The challengers say the language clearly means that the subsidies are available only for qualified individuals who purchase insurance through a marketplace — called an “exchange” — that was “established by the State.” But only about a third of the states, plus the District of Columbia, have done so. He told Washington lawyer Michael A. Carvin that the challengers’ reading of the law — which he characterized as telling the states “create your own exchange, or we’ll send your insurance market into a death spiral” — is the kind of coercive pressure the federal government is not allowed to apply.
Everywhere else, the exchanges have been set up by federal authorities, under a provision of the law that says the federal government must create such exchanges when states do not. The administration says Congress intended for purchasers in those exchanges to receive the subsidies as well. Otherwise, they contended, the law would be doomed to failure. “Perhaps you will prevail in the plain words of the statute, (but) there’s a serious constitutional problem if we adopt your argument,” Kennedy said.
Health-care experts have estimated that as many as 7.5 million people in 34 states could lose the subsidies if challengers prevail. Carvin said that plain reading must be what guides the justices.
There appeared to be no doubt that the court’s liberals would side with the administration. All four aggressively questioned Carvin, who said the issue would be settled simply by reading the words: “established by the state.” “The only provision in the act which either authorizes or limits subsidies says, in plain English, that the subsidies are only available through an exchange established by the state,” Carvin said.
Justice Elena Kagan said Carvin could not ignore that the law sets up a process for federal authorities to step in and establish exchanges if the states opted not to. Without the subsidies, she said, that would be setting up exchanges in which “there will be no customers and there will be no products.” But the law also requires federal authorities to step in when states have not developed their own exchanges, and the court’s four liberals seemed to have no doubts that meant the subsidies follow.
During the time allotted to Solicitor General Donald B. Verrilli Jr., representing the government, the tough questions came from conservative Justices Antonin Scalia and Samuel A. Alito Jr. To read the law as literally as he does, Justice Elena Kagan told Carvin, would mean Congress authorized the establishment of federal exchanges “in which there will be no customers and, in fact, there will be no products.”
When Verrilli said Carvin’s version “cannot be the statute Congress intended,” Scalia replied, “The question is whether it’s the statute Congress wrote.” He said it was not up to the court to “twist the words as necessary” to make them fit the government’s view. She added: “We are interpreting a statute generally to make it make sense as a whole, right? We look at the whole text. We don’t look at four words. We . . . try to make everything harmonious with everything else.”
As is customary, Justice Clarence Thomas asked no questions. Solicitor General Donald B. Verrilli Jr., representing the Obama administration, made a similar point. He said the law meant to provide states with flexibility and avoid “death spirals” in insurance markets, which could occur if not enough healthy individuals are enrolled to make the system financially viable. The challengers’ reading of the law, he said, would put coverage beyond the reach of many.
White House spokesman Josh Earnest said Wednesday afternoon that White House counsel Neil Eggleston briefed President Obama about the court arguments on Obamacare. The “administration is quite pleased with the performance of the solicitor general,” Earnest said. “It revokes the promise of affordable care for millions of Americans,” Verrilli said. “That cannot be the statute that Congress intended.”
“There is no contingency plan that could be implemented to prevent the catastrophic damage that would be done” if the justices ruled against the law, Earnest said. “We would see millions of people lose their health insurance, prices would likely go through the roof, and there’s likely not a whole lot the government could do about it,” he said. “Of course it could be,” responded Justice Antonin Scalia. “I mean it may not be the statute they intended. The question is whether it’s the statute that they wrote.”
The Supreme Court in 2012 upheld the constitutionality of the ACA by a 5-to-4 vote. Roberts sided with the court’s four liberal justices to save the law. The current challenge focuses on how the law should be interpreted. Scalia and fellow conservative Justice Samuel A. Alito Jr. were the most challenging of Verrilli. Scalia said it was not up to the court to “twist the words” of a law to make it fit what the administration said Congress intended.
While supporters of the health-care act have described the lawsuit challenging the subsidies as frivolous, the courts that have looked at the question find the questions raised more difficult. Alito asked Verrilli the question he had the most trouble answering: “If Congress did not want the phrase ‘established by the state’ to mean what that would normally be taken to mean, why did they use that language? Why didn’t they use other formulations that appear elsewhere in the act? Why didn’t they say ‘established under the act’? Why didn’t they say, ‘established within the state’?”
A panel of the U.S. Court of Appeals for the D.C. Circuit ruled 2 to 1 for the challengers, but the full D.C. Circuit put that ruling aside to let all the court’s judges weigh in. Scalia and Alito also played down the dramatic consequences that the administration said would follow from an adverse ruling. Alito said the court could stay its ruling to avoid immediately cutting the subsidies.
Before that could happen, though, the Supreme Court accepted King v. Burwell, a similar case from Virginia. It was a unanimous decision by a panel of the U.S. Court of Appeals for the 4th Circuit that sided with the Obama administration. Scalia said lawmakers could fix the problem if they thought the court had misinterpreted their intent.
Among the six appeals court judges who considered the arguments in the two cases, two said it was clear the subsidies should not be allowed and two said it was clear the law intended for everyone to receive them. The other two formed the controlling opinion from the 4th Circuit, which said it was a close call. “You really think Congress is just going to sit there while — while all of these disastrous consequences ensue?” Scalia asked.
“Simply put, the statute is ambiguous and subject to at least two different interpretations,” wrote U.S. Circuit Judge Roger L. Gregory . “Well, this Congress, Your Honor?” Verrilli replied, as laughter filled the packed chamber. Even House Minority Leader Nancy Pelosi (D-Calif.), sitting in a front row filled with other congressional leaders, smiled.
But in such cases, Gregory wrote, courts should defer to the agency, and he said the Internal Revenue Service permissibly “crafted a rule ensuring the credits’ broad availability and furthering the goals of the law.” There were light moments as Verrilli and Carvin, who also argued the constitutional case three years ago, reunited in battle.
Carvin, representing individuals in Virginia who say that without the availability of the subsidies they would be exempt from buying health insurance they do not want, said the law is not ambiguous. Verrilli, tall and calm, had a better outing than in that earlier case, when his performance was panned by some critics. (He was vindicated when Roberts upheld the act by seizing on a secondary argument Verrilli had made.)
The government’s claim that an exchange established by the state is the same as one established by the federal government is simply trying to turn one thing into something completely different, he said. White House press secretary Josh Earnest said Wednesday afternoon that White House counsel Neil Eggleston briefed President Obama about the court arguments on the Affordable Care Act. The “administration is quite pleased with the performance of the solicitor general,” Earnest said.
“It would certainly be convenient, for an agency seeking to rewrite a statute, if an English phrase can become a term of art on the government’s mere say-so,” Carvin wrote in his brief. “It cannot.” Earnest resisted questions about what the administration would do if it loses. “There is no contingency plan that could be implemented to prevent the catastrophic damage that would be done,” he said. “We would see millions of people lose their health insurance, prices would likely go through the roof, and there’s likely not a whole lot the government could do about it.”
But Verrilli said the challengers were ignoring the intent of a nearly 1,000-page law because of a four-word phrase. Carvin was fast-talking and blustery, with elaborate gesturing and a determination to keep talking even when justices made it clear they wanted to ask more questions. “Wow. You’ve been talking a long time,” Kagan said at one point.
“Determining the meaning of a statute duly enacted by Congress, particularly a statute as consequential as this one, by focusing on isolated phrases divorced from textual crossreferences, definitions, and context — and with no regard for the statute’s structure and design — does not respect the rule of law,” he wrote. “Take a breath,” Justice Sonia Sotomayor counseled.
Challengers of the subsidies have said the text should be clear enough. But if an intent is needed, they say withholding the tax credits was a way to coerce states into creating the exchanges. After the argument, it was the comments from Kennedy that received the most scrutiny. He is the court’s most outspoken advocate of states’ rights, and he said Carvin’s argument must be seen as Congress telling the states “either create your own exchange, or we’ll send your insurance market into a death spiral.”
But Verrilli said such an incentive would have been made more clearly if that were Congress’s goal. And the administration received a boost from 22 states — some that established exchanges, others that relied on federal authorities to do so — saying that they did not understand that there was only one way for their citizens to receive the subsidies. Kennedy brought up the “standard of constitutional avoidance.” That means that if there are two possible interpretations of a statute, judges should choose the one that is plainly constitutional instead of the one that raises constitutional questions.
“While the extensive records of that deliberative process show that the states relied on many factors and came to diverse conclusions when selecting an exchange model, conspicuously absent is evidence that states contemplated the dramatic consequence of depriving their residents of tax credits or destroying their own insurance markets,” said the brief filed by Virginia and others. Verrilli said that would be a “very powerful reason to read the statutory text our way.”
But Kennedy said later that may not be an option if the justices are convinced that the plain language of the statute should prevail.
Kennedy was also concerned that the law might be ambiguous, as a panel of the U.S. Court of Appeals for the 4th Circuit ruled. In such cases, the Richmond-based panel ruled, courts should defer to the agency responsible for implementing the law. The judges found the Internal Revenue Service permissibly “crafted a rule ensuring the credits’ broad availability and furthering the goals of the law.”
That, too, worried Kennedy. “It seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars of subsidies involved here?” he asked.
More than the other justices, Kennedy is the one most likely to think out loud during oral arguments, trying out various theories and posing quandaries for the lawyers.
Verrilli tried to direct Kennedy to the view that the law was not ambiguous, and in line with his view of respect for the states.
“That’s what the canon of reading a statute as a whole to make it work harmoniously directs you to do,” the solicitor general said. “It’s what the very important principles of federalism that we’ve been describing here direct you to do. If you think there’s a constitutional problem with the statute, it’s what the doctrine of constitutional avoidance directs you to do.”
Roberts was even more opaque. The chief justice was blasted by fellow conservatives in 2012 when he came up with the compromise that found the law constitutional, and there were media reports that the justices on the right felt he had changed his vote late in the game.
On Wednesday, he seemed determined not to tip his hand. Normally an active questioner, Roberts instead played the role of impartial umpire, playing traffic cop when the other justices were vying to be heard and allocating more time to Carvin and Verrilli when the questioning cut into their responses.
His only comment of substance came during the discussion of whether, when a law is ambiguous, courts should defer to an executive agency.
“If you’re right,” Roberts said to Verrilli, “that would indicate that a subsequent administration could change that interpretation?”
That’s right, Verrilli said, although he added a new administration would need to make a strong case “that that was a reasonable judgment in view of the disruptive consequences.”
The case is King v. Burwell. If the court follows its normal pattern, it will vote on the outcome at the justices’ private conference on Friday, although it is unlikely the opinion will be ready much before the court completes its term at the end of June.