Thursday, March 05, 2015

Federalism and the burden of textual clarity on the challengers in King v. Burwell

Abbe Gluck

I have a new piece at Politico that follows up on the federalism arguments in King v. Burwell, the challenge to the Obamacare subsidies heard by the Court this week.  Here is an excerpt and link to the full piece:

Federalism comes into play here because, properly understood, the case at the big picture level is all about the nature of the state-federal relationship Congress designed when it wrote the ACA. But federalism is also relevant at the nitty gritty level of legal doctrine and the parsing of the words of the statute, because, as the amicus brief I co-authored in the case details, the court has a set of doctrines that tell it how to interpret statutory text when a federalism question is at issue. Those doctrines prohibit the court from reading a statute to intrude on the states or to impose a drastic condition or consequence on the states unless the statute is crystal clear. The relevance of these doctrines to King, and the textual interpretation question at the heart of the case, is obvious: For the challengers to win, the drastic penalty their reading would impose on the states must be absolutely clear in the statute.

The ACA comes nowhere close to meeting this requisite standard of clarity. As Justice Kagan noted at the oral argument, “This took a year and a half for anybody to even notice this language.” In fact, the four conservative dissenting justices in the 2012 ACA opinion themselves also described the statute as allowing the subsidies. So how could it be, as the challengers now argue, that the subsidies are denied in the statute with crystal clarity, if no one, not even the court, read the statute that way until this case was cooked up? It is also irrelevant if states now understand the possibility of the penalty after the case has received so much attention. The court’s federalism doctrines are about the clarity of statutory text at the time of enactment. Why? Because, as law professor Michael Dorf also noted today, the only way states can protect themselves in the political process—and the way that federally elected officials can best protect the states—is for the states to be on notice of what a potential statute requires so that they can object before it becomes a law. It is unfathomable that, if this penalty really were written into the statute, no state, politician, blogger or insurer would have objected to it in the two years of the ACA’s intense pre-enactment scrutiny. It simply is too drastic and too controversial to have gone unnoticed if it was in there as clearly as the challengers claim.

That should be the end of the matter. Without that requisite level of clarity, the challengers’ reading cannot prevail. There is a lot of post-argument talk on legal blogs about whether or not the Affordable Care Act, as the challengers would read it, coerces the states in ways that may raise constitutional problems, and how the ACA’s insurance exchange provisions compare to what the court found to be the coercive nature of the ACA’s Medicaid expansion in 2012. (The brief I co-authored does not address this question of potential coercion, but others do). But no one needs to answer those questions to decide this case, because the statute cannot fairly be read—whether interpreted as a matter of text, context or in light of the federalism doctrines’ high standard of clarity—as the challengers would read it. Indeed, the court has applied these federalism doctrines in many other cases to reject state-unfriendly readings when the statutory text was miles clearer than this.

Of course, if a justice has remaining doubts about the clarity of the text, the potential constitutional question may indeed have relevance. There is another black-letter doctrine that directs the court, when faced with competing interpretations of a statute, one of which raises a potential constitutional issue, to pick the other interpretation. That doctrine of “constitutional avoidance” is grounded in principles of separation of powers and judicial restraint: It safeguards against the concern that judges will legislate.

But the potentially coercive nature of the consequences also has another kind of relevance. The more dramatic the penalty, the more evident it is that the statute lacked the requisite textual clarity. It is implausible that no one would have noticed such a penalty, if it actually existed. Even Justices Scalia and Alito on Wednesday, at oral argument, assumed that if the court ruled for the challengers, Congress or the states would have no choice but to quickly address the dramatic consequences of the challengers’ interpretation. That very assumption—that the ACA can’t function properly or even tolerably exist as read by the challengers—is another nail in the coffin of the preposterous notion that it was written, in crystal clear fashion no less, to fail.

Read more:

The Secretary of State's E-mails

Mark Tushnet

I have nothing to say about the legalities of Secretary of State Clinton's e-mail practices, except perhaps to note that the reporting on the legal aspects of it (and, as far as I've seen, the general blogging about those aspects) is truly terrible. After a couple of days no one writing in those formats has tried to lay out what the relevant statutes say, and precisely what the regulations applicable to her said. (My guess is that somewhere out there there is a specialized blog that does so.)

My interest here is in a different question, posed by many. It goes something like this: "Why was the Secretary of State communicating with people on an e-mail account that could be hacked?" The assumption behind that question is that the Department of State's e-mail system is less vulnerable to hacking than something like Gmail. I for one certainly wouldn't make that assumption. The folks who run Gmail have a lot more technical expertise than the folks who run the Department of State's e-mail system, and there are a lot more of them. (And, on the other side of the equation, the folks who want to hack into the State Department's system probably have a substantially more intense desire to do so -- and so will devote more to the effort -- than the folks who want to hack into Gmail and rummage around in it for whatever state secrets happen to be there.)

Coercion of the States in King--and the federalism canons

Marty Lederman

In the wake of the oral argument in King v. Burwell yesterday, supporters of the challengers (and even some who support the government’s view) have taken to the newspapers and the blogs in droves to address Justice Kennedy’s questions (see pages 16 and 49 of the transcript) about whether the Court ought to reject, or “avoid,” challengers’ interpretation because it might raise a serious constitutional question—namely, whether the draconian choice put to the States under the challengers’ reading would be impermissibly coercive.

The Solicitor General adequately addressed the avoidance doctrine on page 49, in response to a related question from Justice Alito.  The challengers’ interpretation, he said, would present “a novel constitutional question” and, “to the extent the Court believes that this is a serious constitutional question, . . . then I do think the doctrine of constitutional avoidance becomes another very powerful reason to read the statutory text our way.”

Here, I’d simply like to make two additional points about Justice Kennedy’s coercion concerns.  First, the efforts of challengers’ counsel to minimize the nature of the coercion that would result from his reading of the Act is misleading.  And second, there’s no need for the Court even to grapple with the constitutional avoidance question in King, because another federalism canon of statutory construction—the one I discussed in my post on Monday—suffices to resolve the case (as would the absurdity doctrine, not to mention the government's reading on t).

1.  Petitioners’ reading of the Act would uniquely and dramatically coerce the States.

One of the most surprising aspects of the oral argument was the effort by the challengers’ counsel, Michael Carvin, to paper over the draconian effects of his interpretation of the statute.  In response to questions regarding the effect on the States, Carvin repeatedly characterized Section 36B of the Act as simply a “funding condition” (pp. 16, 79), akin to those Congress has imposed in many other statutes.

Not so.

The condition the petitioners’ reading would impose upon States that choose to allow HHS to set up Exchanges in their territory—denial of tax credits for all of their residents—hardly begins to describe the consequences of such a choice.  In addition, the ACA displaces state insurance regulation in all States, requiring (i) issuance of individual health insurance regardless of preexisting conditions and (ii) pricing of that insurance based upon community-wide characteristics. 

When these reforms are viewed in conjunction with the denial of tax credits that the challengers’ reading would require, the effective choice that would be put to the States is not “establish an Exchange or be denied a federal benefit,” but instead “establish an Exchange or we will destroy your health insurance market, and make your residents worse off than they would have been absent any federal regulation at all.”  That is to say, under the challengers’ view Congress would not be threatening the States with denial of a “carrot,” or even the withdrawal of a very valuable federal benefit or privilege on which the States had come to depend,* but rather, both the denial of important benefits to the State’s residents (the tax credits that allow such residents to purchase insurance on the Exchanges in the first instance) and federal preemption of state regulation of health insurance—a combination that would wreak havoc on the States’ preexisting health insurance markets.  The stark differences between this supposed “offer” to the States and the long-recognized models of federal-state cooperation—namely, conditional grant programs and federal laws permitting state implementation with a federal fallback—are discussed in detail in Part III of the amicus brief filed by Professors Merrill, et al.

2.  The case can be resolved by resort to the Gregory/Bond canon of statutory construction.

Whatever one might think of the constitutional avoidance argument in King, the case can be resolved under another distinct and potent federalism canon of statutory construction that I discussed in my post on Monday—the Gregory v. Ashcroft canon that is the focus of the Merrill amicus brief and that the Court applied last Term in Bond v. United States.  As the Court wrote in Gregory and in Bond (and in New York v. United States):  “It is incumbent upon the federal courts to be certain of Congress' intent before finding that federal law overrides the ‘usual constitutional balance of federal and state powers.”** 
This federalism canon of construction appears to have been what Justice Kagan was alluding to in her remarks yesterday (pp. 27-28):

Let's go back to this question of where . . . Congress put this thing [the alleged choice to the States to establish an Exchange or deny their residents the critical tax credits that permit the Exchange—and the Act as a whole—even to operate], because, putting aside constitutional issues, . . .. there’s at least a presumption, as we interpret statutes, that Congress does not mean to impose heavy burdens and draconian choices on States unless it says so awfully clearly.  And here . . . there’s really nothing clear about this.  [T]his took a year and a half for anybody to even notice this language.  And, as Justice Ginsburg said, it's . . . put . . . not in a place that you would expect it to be put in, which is where [Section 1321] says to the States, “here is the choice you have.”  It's not even put in where the statute defines . . . who is entitled to get the subsidies [the definition of the “applicable taxpayer[s]” in subsection 36B(c)(1)(A)].  Rather, it comes in . . . this technical formula that’s directed to the Department of the Treasury saying how much the amount of  the subsidy should be. . . .   

It both makes no sense from Congress’s point of view, and in terms of our own point of view, in terms of interpreting statutes.  [T]hat’s not the clarity with which we require the government to speak when it’s upsetting Federal­/State relations like this.

Exactly so.  To similar effect, see the Merrill brief at pages 16-20. 

At oral argument, Michael Carvin briefly tried to suggest (p.16) that the Gregory canon only applies when Congress is “taking away a police power” from the States, whereas “here, all the Federal government is doing is [imposing conditions] on billions of free Federal dollars.”  Not so, on either count.  In neither New York nor Bond was the federal government trying to “take away” any state police power.  And, as I explain above, the choice here, on petitioners' view, would be something very different from an ordinary spending condition:  If the threat to destroy a State’s existing market for health insurance doesn’t upset the federal/state balance in a way that should trigger the Gregory canon, it’s hard to imagine what would. 

Moreover, if the Court were to apply the Gregory canon, it would compel affirmance of the IRS’s interpretation.  As I explained in my earlier post, far from any certitude that Congress intended such a draconian effect on the States, the challengers cite virtually no evidence, apart from the contested “established by the State” language itself, that Congress so intended.  And as both the Merrill amicus brief and Justice Kagan’s remarks demonstrate, there are numerous powerful indications in the Act itself that Congress did not have any such intent to put the States to such a potentially devastating choice—not least of which is the implausible manner in which Congress is said to have informed the States of that choice in the results of a calculation made pursuant to a “monthly credit calculation” provision of the Act.

* * * *
I should add, in closing, that even apart from the Gregory federalism canon, the Court could rule for the government without reaching any question of constitutional avoidance if (i) the Court finds that the government’s construction of Section 36B is compelled, when that provision is read in the context of the statute as a whole; (ii) the Court concludes that Section 36B is ambiguous, in which case Chevron deference supports the Department of Treasury reading (see Nick Bagley's post); or (iii) the Court concludes, as Justice Sotomayor suggested (p. 21) and as the Solicitor General argued (p.55), that the statute as a whole would simply “make no sense” under the challengers’ reading—in effect, that it would result in an absurdity at the heart of the Act for Congress to have compelled the Secretary to create and operate Exchanges if either the alleged “inducement” would cause every State to establish Exchanges or residents could not afford to purchase insurance and the insurance markets would collapse in States that declined to do so.  (This last point, about absurdity, is not, as Justice Scalia would have it (p.57), merely that the challengers’ reading would result in “untoward” or “disastrous” consequences—although it certainly would do that—but instead that a key component of the Act itself would simply make no sense under that reading, i.e., that no rational Congress would have written a statute with both such provisions in it.)


* That was basically the scenario under one part of the statute challenged in New York v. United States.  An earlier enactment had approved regional compacts affording all States the right to dispose of their radioactive waste in a cost-effective manner at sites in Nevada, South Carolina and Washington.  The 1986 Act challenged in New York authorized those three States to exact a graduated surcharge for waste arriving from outside the regional compacts, and then, after seven years, to exclude radioactive waste generated outside the region altogether.  The “choice” thus presented to the waste-generating States, according to the Court, was that “States may either regulate the disposal of radioactive waste according to federal standards by attaining local or regional self-sufficiency, or their residents who produce radioactive waste will be subject to federal regulation authorizing sited States and regions to deny access to their disposal sites.”  The Court unanimously upheld Congress's authority to offer the States this either/or choice.  505 U.S. at 173-174; see also id. at 168-169.  The choice presented by the challengers’ reading of the ACA, by contrast, would go much further, by threatening the destruction of a State’s insurance regime if the State chooses not to establish an Exchange.

** Indeed, in New York, 505 U.S. at 169-170, the Court specifically distinguished this “no unbalancing without certitude of congressional intent” Gregory canon from the constitutional avoidance canon.  The Court held in that case that both of those canons were reasons not to construe a seemingly straightforward directory provision—that “each State shall be responsible for providing . . . for the disposal of . . . low-level radioactive waste”—as a mandate to the States, but instead as grounds for reading the statute as a whole to offer the States a choice of either regulating radioactive waste disposal or being subject to one or more of a series of burdens (what the Court characterized as “incentives” to regulate).

Could the Supreme Court Give Congress and the States Enough Time to Fix Obamacare? Probably Not.

Guest Blogger

Timothy Jost

Yesterday's Supreme Court argument in King v. Burwell went largely according to script.  Michael Carvin, cheered on by Justices Scalia and Alito, pressed his argument that a federally facilitated exchange cannot conceivably be an “exchange established by the state,” and cannot, therefore, possibly issue premium tax credits because a subsection of the section on computing those credits refers to exchanges “established by the state.” 

Solicitor General Verrilli, on the other hand, aided by Justices Sotomayor, Ginsburg, Kagan, and Breyer, pointed out that if one reads the statute as a whole, it becomes clear that federally facilitated exchanges are the exact equivalent of state-operated exchanges, with all the same powers.  Moreover, as Justices Sotomayor and Kennedy pointed out, accepting the plaintiffs’ reading of the statute would raise serious questions of unconstitutional coercion of the states, which would face the destruction of their insurance markets effectively without warning.

There was, however, one big surprise in the argument.  About an hour in, Justice Alito said in response to the Solicitor General’s description of the chaos a judgment for the plaintiff would cause:
Would it not be possible if we were to adopt Petitioners' interpretation of the statute to stay the mandate until the end of this tax year as we have done in other cases where we have adopted an interpretation of the constitutional -- or a statute that would have very disruptive consequences such as the Northern Pipeline case?

While there has been some discussion regarding Congress enacting delaying legislation if the Court comes down on the side of the plaintiffs, the possibility of the Court itself delaying its mandate has not been widely considered.  Solicitor General Verrilli appropriately questioned the legality of this possibility.  Article I, Section 9, of the Constitution prohibits the expenditure of funds from the Treasury except by lawful appropriation.  Although the Supreme Court has from time to time delayed the effective date of its judgments, authorizing expenditures that it has decided are illegal is quite another matter.

But the possibility of a brief reprieve from a death sentence for the federally facilitated exchanges in 34 states raises profound practical problems as well.  Presumably the idea is that this would give states time to establish exchanges of their own.  A Supreme Court decision is unlikely, however, to come down until late June. Federal regulations require states to give the federal government six and a half months’ notice before switching from a federally facilitated to a state exchange, and current guidance would require states to notify the federal government by May 1 if they wanted to operate their own exchange by January 1, 2016. 

Moreover, by late June, legislatures in most states will no longer be in session, while in a number of states governors are legally prohibited from establishing exchanges without permission from the legislature. Federal establishment grants, which proved vital to helping states that currently operate exchanges to establish them, are no longer available as of 2015.  Also as of 2015, state exchanges must be self-supporting, without federal operating support.  Finally, in many, probably most, Republican states, neither the legislature nor governor is politically open to setting up a state exchange. 

Insurers will also find a reprieve of a few months unhelpful.  Under federal rules, insurers must file their 2016 rates by May 15, 2015.  In some states insurers may have up until August to revise their 2016 rates, but a Court decision in late June is simply not going to allow enough time for insurers to set rates for 2016 and for states to approve them.  With the great likelihood that premium tax credits will no longer be available in 34 states as of January 1, insurers would likely forego exchange participation for 2016 and, where they can, raise their rates drastically in the individual market outside the exchange.

Of course, Congress could always take action to fix the problem, but as the Solicitor General asked at the oral argument, “This Congress?” (followed by laughter).  There is no escaping the fact that a decision for the plaintiffs will be a disaster—for lower and moderate income Americans who depend on premium tax credits, for Americans who purchase insurance in the individual market where premiums would increase dramatically, for insurers, and for health care providers.  No one should be under any illusion that a brief delay in the effective date of the Court’s decision can in any way ameliorate that disaster. 
Timothy S. Jost is Robert L. Willett Family Professor of Law at Washington and Lee School of Law. You can reach him by e-mail at JostT at

How a Question from Justice Alito Helps Make the Government’s Case in King v. Burwell

Guest Blogger

Brianne Gorod

Yesterday morning, the Supreme Court heard oral argument in King v. Burwell, the latest challenge to the Affordable Care Act.  It was apparent from the Justices’ questions that many of them came into oral argument with strong views about the case, and Justice Samuel Alito was no exception.  Although most of the questions that Justice Alito asked were critical of the government’s position, one actually helps demonstrate why the government should prevail.  

The issue at the heart of King v. Burwell is whether the ACA makes tax credits available to all individuals who qualify based on income, or only to those in states that set up their own Exchanges.  As many of the briefs in favor of the government have argued—and as some of the Justices recognized at argument—a ruling against the government would have serious consequences, rendering the health insurance markets in states with federally-facilitated Exchanges completely dysfunctional.  

Justice Alito tried to suggest that the Court itself could minimize this harm by staying a decision unfavorable to the government in order to give Congress an opportunity to respond: “Would it not be possible if we were to adopt Petitioners’ interpretation of the statute to stay the mandate until the end of this tax year as we have done in other cases where we have adopted an interpretation of the constitutional -- or a statute that would have very disruptive consequences such as the Northern Pipeline case.”  

Justice Alito wasn’t wrong that the Court has done this on rare occasions, including in the Northern Pipeline case he mentioned.  In that case from 1982, the Court held that there were constitutional problems with the bankruptcy system, but stayed its decision for 90 days on the ground that “it is for Congress to determine the proper manner of restructuring the Bankruptcy Act of 1978 to conform to the requirements of Art[icle] III in the way that will best effectuate the legislative purpose.”  According to the Court, “[t]his limited stay [would] afford Congress an opportunity to reconstitute the bankruptcy courts or to adopt other valid means of adjudication, without impairing the interim administration of the bankruptcy laws.”  

The Court did the same thing in Buckley v. Valeo, the 1976 case in which, among other things, the Court held that the Federal Election Commission was unconstitutionally constituted.  The Court stayed its judgment “for a period not to exceed 30 days, insofar as it affects the authority of the Commission to exercise the duties and powers granted it under the Act.”  In that case, too, the Court explained that “[t]his limited stay w[ould] afford Congress an opportunity to reconstitute the Commission by law or to adopt other valid enforcement mechanisms without interrupting enforcement of the provisions the Court sustains, allowing the present Commission in the interim to function de facto in accordance with the substantive provisions of the Act.”

In response to Justice Alito’s question, Solicitor General Verrilli acknowledged that “Northern Pipeline is an example of [the Court] doing that [i.e., staying its judgment], and it will be up to the Court to decide whether it has the authority to do that,” but he correctly noted an important distinction between King, on the one hand, and Northern Pipeline (and Buckley), on the other: “I will say, this does seem different than Northern Pipeline to me, because this is about money going out of the Federal treasury, which is a different scenario,” a distinction that may be significant because the Constitution prohibits money being “drawn from the Treasury,” except by lawful appropriations. 

But there is another important difference between King and those older cases—and it’s one that helps explain why the government should prevail in King.
Read more »

Abigail Moncrieff on King v. Burwell

Frank Pasquale

Sarah Kliff has told the extraordinary story of the employee benefits lawyer who sparked King v. Burwell. Might a federalism-focused amicus brief in the case undo the challengers? Here's some background:
[I]f the Court adopts the petitioners’ interpretation of this statutory provision, millions of people would be cut off from the financial assistance that largely underpins the Affordable Care Act. [Abigail] Moncrieff’s brief argues the petitioner’s interpretation of the statute would render the statute unconstitutional under two principles of federalism: that Congress can't coerce states into implementing federal programs, and that all states must be treated equally.
As Koppelman notes below, the same states' rights ideas at the core of the conservative win in NFIB v. Sebelius may be the undoing of the challenge in King v. Burwell. For an in-depth interview with Abigail Moncrieff on the oral argument, check out the podcast, The Week in Health Law (co-hosted by Nic Terry and me, and also available on iTunes, Stitcher, and other outlets).

Kennedy's love for federalism saves Obamacare?

Andrew Koppelman

Anthony Kennedy loves states’ rights more than he hates Obamacare.

Nearly thirty years after he joined the Court, we are still getting to know him.  He surprised us three years ago when he abandoned his supposed moderation by unsuccessfully attempting to strike down all of Obamacare, relying on embarrassingly bad reasoning to adopt a cramped interpretation of federal power.  This week’s oral argument in King v. Burwell, the case that threatens to gut Obamacare in 36 states, found him on the other side.  Obamacare seems likely to survive the latest episode in what Justice Elena Kagan called “this never-ending saga.”  But the reason is not the challenge’s devastating human consequences, nor the remarkably tortured reading of the statute upon which it relies.  It is the potential intrusion on states’ rights.  That is what Kennedy really cares about.

I explain in a column just posted on, here.

Clear Text versus Extra-Textual Considerations: Bond, Noel Canning, and King

Neil Siegel

For all the textual parsing back and forth at oral argument yesterday in King v. Burwell, the outcome will likely turn on whether five Justices will accept the submission of the challengers that the semantic meaning of four words in the Affordable Care Act (“established by the State”) so clearly excludes the availability of tax subsidies in federally facilitated exchanges as to render irrelevant all other interpretive considerations.  Those other considerations include the implications of the challengers’ reading for other provisions in the ACA, the basic purpose of the law to secure affordable health insurance for almost all Americans, the financial and human consequences of ruling in favor of the challengers, deference to reasonable agency interpretations of the law, and federalism concerns raised by the challengers’ interpretation.  In two cases last Term, Justice Scalia offered just such a framing of the question presented, and in both of them Chief Justice Roberts and/or Justice Kennedy rejected that framing.

The first case was a statutory interpretation decision, Bond v. United States, involving the meaning of Section 229 of the Chemical Weapons Convention Implementation Act of 1998.  In that case, the Court relied in part on extra-textual considerations in determining that the text of the statute was unclear.  In this case,” the Chief Justice wrote for the majority, “the ambiguity derives from the improbably broad reach of the key statutory definition given the term—‘chemical weapon’—being defined; the deeply serious consequences of adopting such a boundless reading; and the lack of any apparent need to do so in light of the context from which the statute arose—a treaty about chemical warfare and terrorism.”  Justice Kennedy joined the Chief Justice’s majority opinion.  By contrast, Justice Scalia, joined by Justices Thomas and Alito, thought that the meaning of the provision was clear.

The second case was a constitutional decision, NLRB v. Noel Canning, involving the meaning of the Recess Appointments Clause.  During oral argument, Justice Scalia repeatedly asked the Solicitor General whether clear constitutional text could ever be trumped by longstanding practice.  See Transcript at 6-8.  Although the Solicitor General answered affirmatively, he also emphasized that it would be “extremely unlikely” for longstanding practice to develop in a way that is contrary to clear text.  Unlike the Solicitor General, no Justice in Noel Canning suggested that practice (or any other considerations) could prevail over clear text.  Rather, the majority in Noel Canning premised its reliance on extra-textual considerations—including historical practice and the basic purpose of the Recess Appointments Clause—on the claim that the text of the clause was ambiguous.  That majority included Justice Kennedy.  Justice Scalia, joined by the Chief Justice and Justices Thomas and Alito, thought that the meaning of the Clause was clear.

At yesterday’s oral argument in King, Justice Scalia again asked the Solicitor General whether “it [is] not the case that if the only reasonable interpretation of a particular provision produces disastrous consequences in the rest of the statute, it nonetheless means what it says.”  Transcript at 47.  This time, the Solicitor General did not bite.  He instead responded that the statute does not say what the challengers and Justice Scalia were arguing that it says.  

Justice Kennedy did not seem to think that the government had the better of that textual argument, but he was palpably concerned about certain extra-textual considerations associated with construing the statute as the challengers do.  Specifically, Justice Kennedy seized upon “a serious constitutional problem” if the Court were to accept the challengers’ reading of the statute—a problem that Abbe Gluck has underscored to great effect.  “It does seem to me,” Justice Kennedy told counsel for the challengers, “that there is something very powerful to the point that if your argument is accepted, the States are being told either create your own Exchange, or we’ll send your insurance market into a death spiral. . . .  The cost of insurance will be sky-high, but this is not coercion.”  Transcript at 16.  Such concerns may cause Justice Kennedy to accept the government’s interpretation of the ACA in order to avoid the constitutional question.  (Indeed, even if one does not accept the coercion objection, there is a serious constitutional question whether the states had fair notice of the consequences if they declined to establish their own exchanges.)

It is difficult to predict what will happen.  Chief Justice Roberts said little about the merits, and Justice Kennedy said a number of things that should bring comfort to both sides.  If Bond and Noel Canning are informative, however, then it is easy to see how the government may prevail.  In both Bond and Noel Canning, Justice Scalia asserted a strict separation between the clear semantic meaning of a legal text and extra-textual considerations.  Justice Kennedy rejected that framing in both cases, and the Chief Justice rejected it in one of them.  The government is likely to win in King as long as either one of them departs from Justice Scalia’s framing.

Wednesday, March 04, 2015

Dueling Visions of Reality in King v. Burwell


One of the strongest arguments for the government's position in King v. Burwell has been based on consequences: if the Supreme Court denied insurance subsidies to customers on federal exchanges, the consequences will be disastrous both for insureds and for the states.

But the problem with arguments for consequences is that they assume that the judges share your view of reality.  If judges deny that these consequences will actually happen, the argument from consequences falls flat. Consider in this context the continuing belief by many conservative politicians that climate change is not due to human activity. Therefore there is no need to pass stricter environmental regulations because human activity is not the cause of any change that might be occurring.

Put another way, if you and the judges don't see reality the same way, then you can't assume that your arguments about disastrous consequences will do very much to change their minds.

This point is especially important in our current world of polarized media, in which liberal and conservative elites increasingly look to their own trusted sources of information.  Justice Scalia, for example, pointed out in a recent interview that he doesn't read the Washington Post anymore because he thinks it is too liberal, and mostly sticks to conservative news sources.  If these sources are telling him that a particular issue is not a problem, then he is unlikely to believe that it is a problem, no matter how much people talk about it in newspapers or on the Internet. Why should he trust their account of reality when he doesn't trust their sources of information?

Therefore it was crucial in the oral argument in King v. Burwell to discover whether any of the Justices actually doubted that denying subsidies in federal exchanges would have disastrous consequences. As far as we can tell, all of the Justices accepted this proposition. (Obviously, we don't know what Justice Thomas thinks, because he doesn't talk at oral arguments.) Justices Scalia, Alito, and especially Justice Kennedy, however, spoke as if they accepted that dire consequences would flow from accepting the challengers' position. Although the Chief Justice said little, it would be very surprising if his views about reality were different.

Scalia and Alito, however, also appeared to believe that Congress would quickly come up with a fix that would avoid the problem, and therefore no serious harm would come from upholding the petitioners' challenge. Here's a key exchange between Justice Scalia and Solicitor General Don Verrilli:

JUSTICE SCALIA: What about what about Congress? You really think Congress is just going to sit there while while all of these disastrous consequences ensue. I mean, how often have we come out with a decision such as the you know, the bankruptcy court decision? Congress adjusts, enacts a statute that
that takes care of the problem. It happens all the time. Why is that not going to happen here?

GENERAL VERRILLI: Well, this Congress, Your Honor, I-  I-

GENERAL VERRILLI: You know, I mean, of course, theoretically of course, theoretically they could.

JUSTICE SCALIA: I-- I don't care what Congress you're talking about. If the consequences are as disastrous as you say, so many million people without without insurance and whatnot, yes, I think this Congress would act.

Verrilli offers the conventional wisdom-- that the current Republican-controlled Congress is hopelessly dysfunctional and that Republicans have been unable to agree on a fix for Obamacare--in part because there is no consensus on a substitute for Obamacare, and in part because their more radical elements will punish politicians who attempt to fix the program.  Moreover, he assumes that it is vain to hope that there will be a bipartisan solution because Republicans and Democrats disagree so pointedly about Obamacare.

Scalia, however, sees things differently. He believes that when push comes to shove, Republicans will overcome their internal divisions and come up with a sensible solution that will preserve insurance coverage for millions while getting rid of the hated Obamacare.  If you read the media that Scalia reads, you might well believe that this is the case.

But even if you don't agree with that view, and you don't regularly get your news from conservative media, you might well believe (or at least hope!) that Congress will respond in the face of a genuine disaster. Republicans will back down from their complete rejection of Obamacare and pass a technical fix.

But that assumes that the Republicans in Congress see the world the way that you do. Some of them may, but some of them may not.  Your judgment of the likely consequences depends on other people's vision of reality.

Scalia's optimism about the consequences of holding for the petitioners is premised on the view that Congress is not really dysfunctional, and that this is an unfair portrait painted by a liberal media. People with a different view of the world will probably disagree-- Congress is broken. Or, at the very least, they have insufficient faith in the current political system to want to gamble that Congress will be able to avoid a disaster.

Competing visions of the world matter greatly in making arguments about consequences. And there many many ways that liberal and conservative elites can find ways to disagree about what is actually happening. Even if the Justices all agree on the consequences of denying subsidies in federal exchanges, they may still have very different views of the world when it comes to how the current political system works and whether Congress can be trusted to work things out. And that difference in their views of reality may be crucial to how the case comes out.

Initial Reaction to the Argument

Gerard N. Magliocca

After reading the transcript (and I certainly defer to the impressions of anyone who was actually at the Court today), I have the following observations:

1.  I was pleased that the standing issue was addressed.  Nobody except Justice Ginsburg was very interested, but at least they grappled with the problem.

2.  The Chief Justice said hardly anything other than introducing the lawyers and keeping time.  I found that rather odd, though it does suggest he was not enthusiastic about hearing this case.

3.  If Justice Kennedy has constitutional doubts about the petitioners' view of the statute but thinks that their interpretation is correct, then he should just accept that reading and find it unconstitutional.  I'm not terribly keen on the expansion of the constitutional avoidance canon under the Roberts Court, as I think that the concept cannot be applied in a principled way.  For example, Justice Kennedy was completely uninterested in the statutory interpretations that would have avoided the First Amendment issue raised in Citizens United.  (Justice Stevens pointed out this problem in his dissent.)  Why is this case any different from that point of view?  

Tuesday, March 03, 2015

Why the ACA challenge violates federalism

Guest Blogger

Simon Lazarus

Opponents of the Affordable Care Act have been caught off guard by the possibility that the challenge in King v. Burwell actually violates principles of constitutional federalism. The federalism argument has been made in two important Supreme Court amicus curiae briefs, one submitted on behalf of 22 states and the District of Columbia, and another on behalf of four law professors – Abbe Gluck, Gillian Metzger, Thomas Merrill, and Nicholas Bagley.

The federalism argument is based on the doctrine of Pennhurst State Hospital v. Halderman, 451 U.S. 1 (1981), written by then-Associate Justice William Rehnquist.  The professors’ brief explains that “Pennhurst and related decisions . . . broadly reflect a strong interpretive presumption that when Congress intends to impose conditions on States’ choices that would result in significant consequences, it does so unambiguously.”  Only with “clear notice” of such consequences, can states exercise choices offered by federal statutes, in a manner that enables them to “serve their proper role in the legislative process and in our federal system.”

Both briefs demonstrate that, if the King v. Burwell challengers’ interpretation is correct, states that refused to set up their own exchanges did not get the requisite “clear notice” that if they turned operation of their exchanges over to the federal government, they would strip their citizens of the tax credits and subsidies that currently help some 87% of them (on average) purchase insurance. Moreover, stripping these subsidies will likely cause the collapse of the exchanges themselves, and disrupt or quite possibly crash altogether these states’ entire individual (non-group) insurance markets. Under the doctrine of Pennhurst, these are pretty significant consequences and they require courts to interpret the statute to avoid springing these consequences on states unawares.  Hence, the challengers’ interpretation must be rejected, and the Obama administration’s competing interpretation – making tax credits and subsidies available nationwide – should be adopted.

On Tuesday, C. Boyden Gray, Adam White, and Adam Gustafson, who authored their own amicus brief in support of petitioners, tried to rebut the federalism argument in a guest post on the Volokh Conspiracy. (The post also references Professor Gluck’s January 27 Politico article summarizing  that argument, and Professor Marty Lederman’s March 2 post on Balkinization to similar effect.)

The gist of their argument is that:
                “We’re not afraid to acknowledge Gluck’s . . . federalism argument; we just think it’s wrong on the merits.  [In the professors’ brief] she offers the following version . . . .
1.       Congress intended to subsidize all health insurance exchanges.

2.       If Congress had further intended to take subsidies away from States that did not establish their own exchanges, then it needed to state this intent with clearly stated terms.

3.       Because Congress did not state in sufficiently clear terms any intent to remove subsidies from those States, the statute should be construed not to take the subsidies away from them.”
. . . .
 “The problem with this argument, however, is that it presumes the very issue before the Court: whether Congress intended to grant those subsidies to all States in the first place. Gluck and her colleagues are not answering the question presented-they're begging it.”

But Gluck’s argument does not have to assume that “Congress intended to subsidize all health insurance exchanges.” All she has to assume is (2) and (3)—that draconian consequences followed from a choice offered to states by a federal law, and that there was no clear notice of those consequences; therefore courts should adopt the Government’s reasonable alternative interpretation that avoids those consequences (and also avoids the serious constitutional questions that would arise if courts accepted the challengers’ interpretation). 

In the record of Congress’ enactment of the ACA, and Executive and state implementation, there is little if any room for serious dispute about the factual predicates of this simple two-step argument.  Even the challengers' lawyers had no inkling of their own subsidy-nullifying interpretation until several months after the statute was signed into law.  As demonstrated by the amici brief submitted by the Constitutional Accountability Center on behalf of key Congressional leaders and state legislators, there is no contemporaneous evidence that states actually thought that they were being threatened with loss of subsidies when they made their decisions about whether to establish an exchange in the months after the ACA’s enactment. Gray, White, and Gustafson’s post does not even try to refute these facts; instead they offer an irrelevant lament that the Obama administration has tried to "replace federalism with nationalism."

If the opponents of the ACA have an answer to the Pennhurst federalism argument, they have not yet managed to articulate it. 

Simon Lazarus is Senior Counsel to the Constitutional Accountability Center.  You can reach him by e-mail at

The "plain meaning" of blogposts and of briefs: A response to Gray, White and Gustafson

Marty Lederman

Over on the Volokh Conspiracy, C. Boyden Gray, Adam White and Adam Gustafson--the authors of an amicus brief filed on behalf of the Galen Institute and 21 state legislators (19 from Tennessee and two from Ohio)--take issue with my post from yesterday.

In my post, I emphasize "a federalism canon of statutory construction that the Court invoked and applied just last Term, but that the challengers entirely ignore--a canon that is the focus of an important amicus brief filed by Jim Feldman on behalf of Professors Tom Merrill, Gillian Metzger, Abbe Gross and Nick Bagley."  The canon in question was applied by the Chief Justice, on behalf of six Justices, in last year's Bond decision--namely, “the well-established principle” that “‘it is incumbent upon the federal courts to be certain of Congress' intent before finding that federal law overrides' the ‘usual constitutional balance of federal and state powers.’”  Bond slip op. at 12 (quoting Gregory v. Ashcroft, 501 U.S. at 460).

The Galen Institute attorneys write:  "Georgetown’s Marty Lederman asserted on the Balkinization blog yesterday that 'the challengers entirely ignore' the federalism argument."  This "comes as quite a surprise to us," they write, "because federalism was a central point in our own brief (on behalf of State Legislators and the Galen Institute), as well as the brief filed by Oklahoma and several other States."

Much as they might wish otherwise, the Galen attorneys and their clients are not the "challengers" to which my post was referring--four individuals represented by Michael Carvin are.  (This is self-evident from my post, which repeatedly quotes from and cites their briefs.)  And my representation was correct: those challengers have entirely ignored the Gregory canon that is a central focus of my post and of the Merrill brief.

For what it's worth, however, the Galen brief and the Oklahoma amicus brief also fail even to mention, let alone contend with, the Gregory/Bond canon that “‘it is incumbent upon the federal courts to be certain of Congress' intent before finding that federal law overrides' the ‘usual constitutional balance of federal and state powers.’”*

Those top-side amicus briefs do make other federalism-based arguments, some of which Gray and his colleagues summarize in their post.  My post was not about those arguments.  Part III of the Merrill amicus brief, however, does address Oklahoma's arguments directly.  That brief speaks for itself (quite powerfully, I think), and I commend it to interested readers.

* In an earlier version of this post, I mistakenly stated that the Oklahoma brief mentions the Gregory "certainty of congressional intent to upset the balance" canon.  That brief does quote selectively from parts of Gregory surrounding the statement of the canon, but does not mention the canon itself.

Monday, March 02, 2015

"Plain meaning," absurdity, and the (almost forgotten) Gregory/Bond federalism canon, in King v. Burwell

Marty Lederman

There are over 400,000 words in the Affordable Care Act.  The challengers in King v. Burwell rely upon a single one of those words—a simple preposition (“by”) buried in a provision (26 U.S.C. § 36B) setting forth the formula for individuals' monthly tax credits—as the basis for an interpretation of the Act that would unravel Congress’s efforts to guarantee affordable health care for all Americans.

According to the challengers, Congress’s use of the word “by” in the phrase “an Exchange established by the State” (rather than, for example, referring to an Exchange established “within” or “for” the State) has a world-changing impact:  On their reading, when a State chooses to allow the federal government to set up a health-insurance Exchange for its residents—an option the Act plainly allows, and one that almost three dozen states have adopted—that choice would have catastrophic consequences, namely, the denial of tax credits for all of the State’s residents who wish to purchase insurance on that Exchange . . . which would in turn lead to the virtual destruction of the insurance market in that State, thereby making the State’s residents much worse off than if Congress had not enacted the ACA at all.  See, e.g., NFIB v. Sebelius, 132 S. Ct. at 2674 (Scalia, Kennedy, Thomas, and Alito, JJ., dissenting) (“[The Act’s] system of incentives collapses if the federal subsidies are invalidated.… With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.”).

For good reason, the challengers make little effort to demonstrate that any members of Congress, let alone majorities of both houses and the President, actually intended to put the States to such a terrible choice, with such ruinous consequences if a State chooses one of the options Congress has offered.  (Indeed, such an argument would be belied by the fact that no legislators mentioned, or were aware, that they had done so--and that no one else realized it either, until an attorney stumbled upon the idea nine months after the law's enactment.)  

Even so, the challengers say, Congress’s actual intent “is legally irrelevant” (page 14 of their reply brief).  It is enough, they contend, that this sort of bullet-to-the-head of the States would facilitate one of Congress’s subsidiary goals—namely, to induce the States to create Exchanges—even if the cost of not fully realizing that goal would be not only to render unachievable the principal objective of the Act (guaranteeing affordable health care for all Americans), but also to destroy the existing health-insurance markets, such that health care would be much less affordable than it was before Congress enacted the law.

A great deal has already been written—in the briefs, online and elsewhere—about the substantive merits of the challengers’ account of the Act, and, in particular, about the proper interpretation of the subsidy-calculation phrase in section 36B on which the challengers rely: “an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.”  To oversimplify a bit, there are three basic positions regarding the interpretation of that phrase:
-- The government argues, and I agree, that the phrase, read in the context of the Act's text as a whole, plainly does not disqualify individuals who purchase a plan through a federal Exchange from being eligible for the tax credits that make such a purchase possible, because when a State declines to create an Exchange under section 1311 of the Act, and HHS steps in to set up “such Exchange” under section 1321, that federal Exchange qualifies as an “Exchange established by the State under section 1311” for purposes of the Act.
-- Others, such as the majority of the Fourth Circuit panel in King, conclude that the phrase in section 36B is ambiguous on that question—in which case the proper outcome for the Court (under Chevron) would be to defer to the IRS’s reasonable interpretation that such credits are available in States where the federal government has established the Exchange.
-- The challengers stake out the third position—that the “plain meaning” of the contested phrase in section 36B precludes such tax credits in States where the federal government operates the Exchange.
For the purposes of this post, I will assume the challengers are correct, i.e., that the “plain meaning” of the words of section 36B isolation, would preclude tax credits in States where HHS has established the Exchange.  As noted above, I think the opposite is true—that the government’s reading is compelled.  But the purpose of this post is to examine what the Court should do if it were to agree with the challengers on the “plain” meaning of that particular statutory language.  In particular, and as explained more fully below, such a plain meaning would not resolve the case in the challengers' favor, not only because it would establish a fundamental absurdity at the heart of the statute, but also because of a federalism canon of statutory construction that the Court invoked and applied just last Term, but that the challengers entirely ignore--a canon that is the focus of an important amicus brief filed by Jim Feldman on behalf of Professors Tom Merrill, Gillian Metzger, Abbe Gross and Nick Bagley.

Read more »

What are the facts of King v. Burwell?


Steve Brill, who recently wrote an exhaustive--and often critical--history of the genesis of Obamacare, and who interviewed virtually everyone involved with it, reports that the petitioners' claim that “Congress could not have chosen clearer language to express its intent to limit subsidies to state exchanges,” is a complete fiction. If the petitioners are making a claim about what Congress intended or what its purposes were, Brill explains, there is nothing to their case.

It is possible to argue, as the architects of the lawsuit originally did, that Congress may have wanted to make subsidies available on all exchanges, whether operated by the federal government or by the states, but that Congress didn't succeed in doing so because of a "glitch" in the wording of the statute.  But that approach--call it the glitch theory--would have greatly weakened their case. Instead  they decided to make a far stronger-- and far more daring--argument.  First, they argue that the language denying subsidies on federal exchanges is both clear and unambigious (so that Chevron deference to the IRS's interpretation does not apply). Second, they argue that the language is clear because it reflected a deliberate choice by the people who drafted the legislation, if not by each and every member of Congress who voted for the legislation.

Brill's point is that there is no evidence to substantiate that claim.
I know what the legislators intended because in researching my book, I interviewed pretty much everyone involved in the conception and writing of the law. Moreover, I did that long before King v. Burwell had become the Obamacare opponents’ favorite new weapon, which means that those opponents had no reason to spin the fairytale that Congress did not intend for those subsidies to go to the millions of Americans signing up on the federally run exchange. At the time, no one had a dog in a fight over congressional intent, because there was no fight.

I also reviewed reams of internal emails and memos generated by congressional staffers working for both Democrats and Republicans. In no document from start to finish, in a legislative process that spanned more than two years, is there even a hint of anything but the unambiguous assumption that the law, whose first section is titled “Quality, Affordable Health Care for All Americans,” would indeed provide these insurance subsidies for all Americans who needed them.

In short, I had a catbird seat for doing exactly that kind of fact-based reporting that anyone judging a case like this — reporters, as well as judges — should do. But I didn’t appreciate it because neither I nor the people I was interviewing had any expectation that this case would become something the Supreme Court would take seriously.

Indeed, when I mentioned the case to several of those sources during the spring and summer of last year, all of them – Democrats and Republicans – did some version of an eye roll. This is why there is only scant mention of the case in my book, the draft of which was completed before the court took the case.

I’ve now gone back and looked at my notes and can report that I interviewed 21 congressional staffers and members last year in my effort to reconstruct the day-by-day narrative of how Obamacare happened. None ever mentioned the possibility that the subsidies did not apply to the states in the federal exchange.

On the contrary, everything they told me — and all of the contemporaneous emails and other internal documents I reviewed — assumed that the federal exchange would simply be a substitute for a state exchange if a state decided not to launch its own, and that the same rules would apply.
Brill repeatedly refers to legislative intent in his discussion.  King v. Burwell is being fought primarily on textualist grounds, rather than on grounds of legislative intent. Even so, the petitioners have not thought it enough merely to argue that the text is clear and admits of no other reasonable construction. That is because the government has an equally viable textualist argument-- that the meaning of the terms in the statute must be understood in the context of the statute as a whole. If we take the entire text into account, petitioners must deal with the fact that there is more than one reasonable construction. (Indeed, my own view is that, because of the havoc it would wreak on the entire statutory scheme, the petitioners'  construction is not reasonable. Moreover, as Marty points out above, the federalism and avoidance canons would also support the Government's construction.).

To meet the government's textual argument, the petitioners must do more than point to one small portion of the text. They must argue that the language of the statute reflects a clear purpose to deny subsidies for health insurance if states did not create their own exchanges. That argument, however, brings the question of Congress's purpose back to the forefront of the litigation. The question of Congress's purpose is, as Brill says, a question that can be addressed through gathering evidence about the real world.  And there is no evidence that Congress actually wanted to threaten states that it would withhold tax subsidies  unless states created their own exchanges. Petitioners' account of Congress's purpose, Brill concludes, is simply made up.

King – Obamacare subsidies as textualism’s big test

Abbe Gluck

In November, I participated in a SCOTUSblog symposium on King, the Obamacare case that the Court will hear this week. The case, as I argued then and still deeply believe, is textualism's biggest test yet. Will the textualists show us -as they have been arguing for the past 30 years--that textualism is indeed a sophisticated and objective method of statutory interpretation that is a safeguard against judicial activism?  Textualism has had enormous success in the federal courts over the past decade, but those judges who have moved in textualism's direction will surely question those moves if textualism doesn't deliver what it promised.  Given that we are going to hear a lot of textualism talk this week and in the coming months, and to help folks get up to speed on these issues, I have reprinted (with permission ) my SCOTUSblog contribution below:

Obamacare’s opponents have depicted the challenges in King v. Burwell, Halbig v. Burwell, and the other subsidies cases as the choice between clear statutory text and vague notions of statutory purpose.   This is a smart strategy, because it creates the illusion of an easy choice for the Court’s textualists, and even for most of the other Justices. Textualists have spent three decades convincing judges of all political stripes to come along for the ride, and have had enormous success in establishing “text-first” interpretation as the general norm. In so doing, textualists have repeatedly emphasized that textual interpretation is to be sophisticated, “holistic” and “contextual,” not “wooden” or “literal,” to use Justice Scalia’s words. A lot of us (myself included) have gone to bat for this version of textualism, arguing that it is democracy enhancing and in furtherance of rule-of-law values, such as predictability.
The King challengers put all that on the line, and threaten all that textualists have accomplished. This is because King is not actually a text-versus-purpose case. Rather, King is about the proper way to engage in textual interpretation; specifically, about the interpretation of five words in a long and complex modern statute. And no one has to – or should – go outside the four corners of the Affordable Care (ACA) to decide it. So let’s cast aside the red herring of untethered purpose, and ask the question that gives King significance beyond the politics of health reform (and is a reason for the Court to avoid those politics): Will the Court follow, what Justice Scalia just five months ago (in Utility Air Regulatory Group v. EPA) called “the fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme”?
The five words at issue sit in a provision that requires the ACA’s insurance subsidies to be calculated based on premiums for individuals enrolled through an “Exchange established by the State under 1311” (ACA § 1401); the question is whether the IRS properly interpreted the ACA to allow those subsidies also to be available on federally operated exchanges (which now are the majority of exchanges). Section 1311 establishes the state-run exchanges and so, read in a vacuum, Section 1401 appears at first glance to deny the subsidies on federal exchanges. In context, however, the words are at a minimum highly ambiguous, and arguably actually clearly provide for subsidies on the federal exchanges.
Justice Scalia, an ardent proponent of judges not engaging in “legislation” under the guise of interpretation, has argued that the Court’s role is to adopt the interpretation that “does least violence to the text” (Green v. Bock Laundry). The IRS’s interpretation accomplishes that goal: Section 1401 can still be read literally because the section that authorizes the federal exchanges, Section 1321, provides that if a state does not establish an exchange under Section 1311, the Department of Health and Human Services (HHS) “shall . . . establish and operate such Exchange within the State.” In other words, HHS must “establish” a Section 1311 exchange, which is a state exchange. Moreover, the Act defines “Exchange,” with a capital E, three times in the statute as a “state” exchange. And HHS, in Section 1321, is told to establish “such [capital E] Exchange.” The Court need not add or delete a single word of the ACA to reach this conclusion. (In fact, the Court shouldn’t be engaging in that enterprise in the first place. This is a Chevron case: an agency interpretation is at issue, and so all that is required is that the agency’s own construction be reasonable.)
On the other hand, as amply detailed in the briefing, the ACA’s text – not its purpose or its legislative history, or anything else that textualists don’t generally consider – is slashed to pieces under the challengers’ reading. Two examples from a list of many offered in the briefing:
  •  Section 36B(f)(3) requires “[e]ach Exchange (or any person carrying out 1 or more responsibilities of an Exchange under section 1311(f)(3) or 1321(c)” to report the premiums doled out. Section 1321 is the federal exchange provision, and so this section is rendered meaningless if the federal exchanges have no subsidies.
  • Likewise Section 1312(f) provides that only “qualified individuals” can purchase on an Exchange but defines a qualified individual as one who “resides in the State that established the Exchange.” Failure to understand a federally operated exchange as the legal equivalent of a state exchange would mean that federal exchanges have no customers.
Justice Scalia’s own statutory interpretation treatise argues (at pages 63 and 168) that “there can be no justification for needlessly rendering provisions in conflict if they can be interpreted harmoniously,” and that statutory provisions should not be interpreted to render them ineffective or superfluous.
Textualists also advocate structural, contextual interpretation. As Justice Scalia’s treatise puts it (at 168): “[N]o interpretive fault is more common than the failure to follow the whole-text canon, which calls on the judicial interpreter to consider the entire text, in view of its structure and of the physical and logical relation of its many parts.” The subtitles of the ACA immediately surrounding the provision in question are a set of interlinking pieces: they add new requirements on insurers to make insurance accessible; impose the infamous individual mandate on the public to populate the insurance pools; and create the federal and state exchanges and authorize the subsidies (which the exchanges deliver) to make insurance purchase accessible and affordable enough for the individuals now required to purchase it. In their 2012 joint dissent in NFIB v. Sebelius, Justices Scalia, Kennedy, Thomas, and Alito read these parts as making no logical sense without one another and also read the statute to include subsidies on federal exchanges:
“Congress provided a backup scheme; if a State declines to participate in the operation of an exchange, the Federal Government will step in and operate an exchange in that State.”
and then:
“That system of incentives collapses if the federal subsidies are invalidated. Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges, and some insurers may be unwilling to offer insurance inside of exchanges. With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.
The 2012 Supreme Court brief of the state governments likewise read the statute as providing subsidies through the federal exchanges: “If a State is not willing to create and operate an exchange, the federal government will step in and do so itself. ACA § 1321(c). Subtitle E then establishes tax credits and other subsidies for the lower-income individuals and small businesses that purchase plans on the exchanges. ACA §§ 1401–21.” It is no coincidence that the section of the ACA in which all this appears is entitled “State Flexibility Relating to Exchanges”; the provision establishing the federal exchange (Section 1321) also has the title “State Flexibility.” By using this terminology, the text by its own terns gives states the choice – without penalty – between operating an exchange or letting the feds do it for them.
The 2012 plaintiffs – represented by the same lawyer in King – even argued that the entire Affordable Care Act should have been struck down without the subsidies, because it could not function without them.
Textualists apply several canons of construction premised on the assumption that Congress does not write statutes to fail. One is constitutional avoidance. Another is severability. (Both were used to save the ACA in NFIB.) Related is the major questions rule, which presumes that Congress is not subtle when it makes a major statutory move. The King challengers are asking the Court to adopt a reading that assumes that Congress purposefully designed the federal exchanges without the very same subsidies that in 2012 even the ACA’s opponents viewed as essential to the statute’s functioning. In other words, they are now arguing that Congress intentionally configured the federal exchanges to be doomed to fail. If that isn’t a major question that requires an explicit statutory statement, what is? The purpose of all of these rules – avoidance, severability, major questions – is to keep judges from “legislating”; that is, from interpreting a statute in ways that would make it unrecognizable to enacting Congress, as the proposed reading surely would.
In an effort to lend plausibly to their interpretation, the challengers have spent the past year constructing a narrative that the Exchange provisions operate exactly like Medicaid does: that Congress needed a “stick” – taking away the subsidies – to convince the states to operate the exchanges themselves. I have illustrated elsewhere that this reading of legislative history is inaccurate, but more importantly for this post, note that the challengers have to look outside the text of the statute to even try to construct this narrative. The text is fatal to this argument. Another common textual rule of interpretation, exclusio unius, draws strong inferences from Congress’s utilization of statutory structure in one part of a statute or related statutes and its omission from another. Medicaid is explicit that states lose their funding (and there is no federal fallback) if they do not cooperate. The ACA has not one word on that point in the exchange context and instead does what Medicaid doesn’t: the ACA provides fallback federal exchanges. This is exclusio unius 101: Medicaid shows that Congress knows how to be explicit if it wishes to use a federalism “stick.” The lack of an analogous provision for the exchanges leads to precisely the opposite of the challengers’ reading under textual analysis.
Textualists have spent the past thirty years persuading even their opponents of the jurisprudential benefits of a sophisticated text-based interpretive approach. The King challengers put that all at risk. To be clear: my argument isn’t about the merits of the ACA. The ACA isn’t perfect health policy. But the King challenge is all about the ACA’s merits. They have vowed to destroy the statute at any cost, even if it means corrupting textualism to do it.

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