The Affordable Care Act Dodges a Bullet

On June 25, 2015, the Affordable Care Act (ACA) dodged a potentially fatal legal bullet. In King v. Burwell, the US Supreme Court, in a majority decision written by Chief Justice Roberts, rejected a challenge to an IRS tax credit regulation that threatened to unwind the entire fabric of President Obama’s signature health care law. This is the second time in three years Roberts has saved the ACA from demise.

A major component of Obamacare is the individual mandate, which requires those who are not otherwise covered by a health insurance policy to purchase insurance at their own expense. Low income individuals receive a tax credit to help offset the cost of premiums. In 2012, the Chief Justice penned the decision that held the ACA’s individual mandate was constitutional under Congress’s power to levy taxes. The most recent challenge to the law was not based on the constitution, but rather on the statute itself and the legality of an IRS regulation based on the statute.

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To facilitate the individual mandate, the ACA requires the formation of a health care insurance “exchange” or marketplace in each state. Individual state exchanges are required because the insurance industry is, traditionally, an area of state, not federal, concern and each state regulates insurance providers somewhat differently. The ACA encourages states to form their own exchanges, but also provides for federally created exchanges to accommodate individuals in states that do not participate. As noted by Chief Justice Roberts, 36 states have not created health care exchanges and millions of their residents rely on federally created exchanges. The challenged IRS regulation grants tax credits to qualified individuals in all states even though the tax code portion of the statute uses the term “[e]xchanges established by the states” when defining certain relevant provisions.

Statutorily created regulatory agencies, like the IRS, only may act as directed by statute. The petitioners in this case alleged the IRS exceeded its authority by granting tax credits to those who purchased insurance on federal, rather than state, exchanges. Had the petitioners succeeded, the financial stability of the ACA insurance program would have been in jeopardy because millions of healthy individuals would not purchase health insurance because they would not be able to afford the premiums. This would hinder the ability of insurance companies to pay the health care bills of the remaining participants and, eventually, drive insurers out of business.

Although Roberts ultimately ruled the IRS regulation applies the correct interpretation of the law, he drolly acknowledged, “The Affordable Care Act contains more than a few ex­amples of inartful drafting,” and even referenced a political cartoon in which a Senator proclaims to his colleagues, “I admit this new bill is too complicated to understand. We’ll just have to pass it to find out what it means.” In the end, however, the Chief Justice applied a contextual theory of statutory interpretation that emphasizes the language and intent of an entire statute rather than the narrow meaning of isolated words or phrases. Roberts used painstakingly detailed linguistic analysis to support his determination that the contested phrase, “established by the state,” must be construed as applying to all exchanges, but he also relied on the cold-hard fact that to do otherwise would nullify the entire legislation.

The Chief Justice concluded his opinion with a strong statement regarding the judiciary’s role in the balance of power and a defense of his decision “to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.” Roberts first quoted Marbury v. Madison, the landmark case that established judicial review, “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.’” He continued, “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.”

Justices Breyer, Ginsburg, Kagan, Kennedy, and Sotomayor joined in the majority opinion. Justice Scalia’s dissent, which was joined by Justices Alito and Thomas, is clear and forceful. “The Court holds that when the Patient Protection and Affordable Care Act says 'Exchange established by the State' it means 'Exchange established by the State or the Federal Government.' That is of course quite absurd, and the Court’s 21 pages of explanation make it no less so.”

Ellen K. Boegel, an associate professor of legal studies at St. John’s University in New York, clerked for the United States Court of Appeals for the Second Circuit.

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Nancy Hooyman
2 years 5 months ago
As a physician I am glad a few people are able to keep their health insurance. But Obama care is not enough and allows the private insurance industry to to charge outrageous rates and the pharmaceutical companies to run wild. Not to mention the time wasting nonsense it forces physicians to do.
Joshua DeCuir
2 years 5 months ago
It would have been nice to hear Pres. Obama & Vice President Biden apologize publicly today to Chief Justice Roberts for their baseless accusations against him in 2005 when they refused to support his nomination. I daresay the legacy of the President has been almost wholly-shaped by the Chief's common sense, pragmatically conservative approach. If he can publicly call out the Court on those opinions he disagrees with, he ought to have the decency to acknowledge that the Chief has done him a service, & that he was wrong on the merits of his opposition to his nomination. But I won't hold my breath.
Vince Killoran
2 years 5 months ago
In general it's not a good idea to hold your breath until someone provides you with an apology. You never write why Obama & Biden should apologize. Roberts is a conservative jurist, one who is particularly comfortable rendering decisions friendly to business (especially the Chamber of Commerce). The Chamber didn't file a brief in this case but HCA, the nation's largest health care company and one that is closely aligned with the Chamber, did so. They informed the Court that the plaintiff's argument against the ACA was "absurd." Please be reassured: Roberts is a conservative.
Tom Maher
2 years 5 months ago
This post is an excellent and accurate summary of the June 25, 2015 King v. Burwell Supreme Court decision free of gratuitous political comments and biases. Thanks to the author, Ellen K. Boegel, for the nonpartisan and professional presentation of the essential details of the King V. Burwell Supreme Court decision.
Bill Mazzella
2 years 5 months ago
As the MD pointed out there is too much leeway in what the doctors can charge. Too much seems to be placed on people who had good insurance before the ACA. So we have to learn more. Roberts did point out as Ellen points out that we do have to look at the intent of the legislature. Roberts may have his political leanings. But on this day, as in the first ruling on ACA, he did the right thing. There is politics and then there is insanity. I suggest a sanity test for Scalia, Alito and Thomas. Judicious they are not.

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