King v. Burwell, 576 U.S. 473 (2015), was a 6–3 decision by the Supreme Court of the United States interpreting provisions of the Patient Protection and Affordable Care Act (ACA).
The petitioners had argued that the plain language of the statute provided eligibility for tax credits only to those persons in states with state-operated exchanges.
[4] Government figures released June 2, 2015 (for the period ending March 31, 2015) show that approximately 6.4 million Americans were enrolled in a federal exchange and received a supplement at that time, and thus, presumably would have lost the subsidy had the court found for the plaintiff.
[5][6] On the benefits side, supporters of the plaintiffs argued that stopping unauthorized government spending was important in its own right, that issuing the subsidies was unlawfully subjecting 57 million Americans to taxes from which they were statutorily exempt, and that removing those subsidies "would lend transparency to the PPACA by revealing to millions of Exchange enrollees the full cost of the law’s mandates and regulations.
[note 2][9] If the subsidies and (in effect) the mandates had been struck down in the other 34 states, many thought that the economic foundation of the ACA would have been undermined, putting the entirety of the legislation at risk.
[17] Oral arguments were heard on March 4, 2015, and a decision was handed down on June 25, 2015, with a win for the Obama administration preserving subsidies in states that have not established their own exchange.
This doctrine states that agencies are presumed not to have delegated authority for actions with exceptional economic and political consequence unless the statute is clear.
[17] In a 2009 paper published in The Journal of Law, Medicine & Ethics, Timothy Jost argued that one way to avoid a commandeering issue with the ACA would be "by offering tax subsidies for insurance only in states that complied with federal requirements.
"[29][30] Jost later published an op-ed in the Washington Post arguing that allowing subsidies for Federal exchanges is "the only way of reading the statute that makes sense.
"[20] On January 18, 2012, Jonathan Gruber, a Massachusetts Institute of Technology economist who was a consultant on the ACA, said, "What's important to remember politically about this is if you're a state and you don't set up an exchange, that means your citizens don’t get their tax credits.
"[32] On January 10, 2012, Gruber said, "... if your governor doesn’t set up an exchange, you're losing hundreds of millions of dollars of tax credits to be delivered to your citizens.
"[34] Sarah Kliff of Vox cited as evidence of Gruber's comments being mistaken the fact that despite speaking "regularly to dozens of reporters during this period", he "never mentioned this idea to any of them", and that his models always assumed that subsidies would be available on both state and federal exchanges.
[36] The King plaintiffs, in their briefs filed in December 2014, referred to Gruber's comments as an indication of Congressional intent supporting their position.
[37] Though the challengers in the Supreme Court case have argued that then-Nebraska Sen. Ben Nelson, who by insisting that states take the lead in establishing the exchanges, meant that Congress had intended that tax credits go only to qualified recipients in states that had established their own insurance exchanges, Nelson has denied this interpretation in an amicus brief filed with the court, January 28, 2015.
In a letter to Sen. Bob Casey who sought Nelson’s view, the former senator wrote, "I always believed that tax credits should be available in all 50 states regardless of who built the exchange, and the final law also reflects that belief as well".
[41] When Health Committee Chairman Ted Kennedy died, however, he was replaced with Republican Scott Brown, who had won a special election by promising to filibuster the ACA.
The investigations also suggested that some plaintiffs may lack standing because the cheapest available subsidized insurance was over 8% of their income, making them exempt from the individual mandate.
[44] The Fourth Circuit court unanimously upheld the regulation, saying that the wording in the statute was ambiguous, and that the IRS wording was a reasonable interpretation of the statute:[14] The plaintiffs-appellants bring this suit challenging the validity of an Internal Revenue Service (“IRS”) final rule implementing the premium tax credit provision of the Patient Protection and Affordable Care Act (the “ACA” or “Act”).
The plaintiffs contend that the IRS’s interpretation is contrary to the language of the statute, which, they assert, authorizes tax credits only for individuals who purchase insurance on state-run Exchanges.
[....]Rejecting all of the plaintiffs' arguments as to why Chevron deference is inappropriate in this case, for the reasons explained above we are satisfied that the IRS Rule is a permissible construction of the statutory language.
[50] University of Michigan Law School Assistant Professor Nicholas Bagley described the decision to grant certiorari as indicating that "four justices apparently think—or at least are inclined to think—that King was wrongly decided".
[51] Alabama, Georgia, Indiana, Nebraska, Oklahoma, South Carolina, and West Virginia joined amicus briefs in support of the challengers.
[52][53] California, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Iowa, Kentucky, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Rhode Island, Vermont, Virginia, and Washington filed an amicus brief in support of the government; they state in one part that, under the Pennhurst doctrine, in cooperative federalism legislation passed by Congress, if Congress wishes to impose any conditions on the States, then it must give "clear notice" of such conditions; otherwise, the conditions are invalid.
They argue that the controlling phrase "an Exchange established by the State" is "buried in two sub-sections," which effectively "'hide[s] elephants in mouseholes,'" were it to mean that Congress imposed the condition on the states that they must establish their own exchanges or their residents would not receive federal subsidies; they say that because of this, the phrases "fail the Pennhurst clear-notice test," thereby making the foregoing condition invalid.
In the brief, the public health officials estimated that eliminating the premium tax credits in states that use the federal exchange would result in 9,800 additional deaths per year.
This figure was based on earlier studies of the impact of the Massachusetts health care reform law on death rates in that state.
v. Timbers of Inwood Forest Associates, (an opinion written by Justice Scalia[68]) looked "to the broader structure of the Act to determine whether one of Section 36B's 'permissible meanings produces a substantive effect that is compatible with the rest of the law.'"
It rejected petitioners' interpretation "because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very 'death spirals' that Congress designed the Act to avoid.
"[70] Here, the statutory scheme compels us to reject petitioners' interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very "death spirals" that Congress designed the Act to avoid.
Scalia also notes that the ACA knows how to equate unlike terms explicitly, as it declared that "[a] territory that...establishes...an Exchange...shall be treated as a State."