Why “King v. Burwell” Obamacare Case Is Not “NFIB v. Sebelius” Redux

supreme courtThe Supreme Court’s decision to hear King v. Burwell means that the Court, for the second time in three years, will be deciding an issue that will have a major impact on the Obama Administration’s ability to implement the Affordable Care Act. The ACA’s requirement that individuals purchase health insurance or else pay a penalty barely survived a constitutional challenge in June 2012 when the Court voted 5-4 in NFIB v. Sebelius to uphold the mandate as a proper exercise of Congress’s power under the Taxing Clause. The claim raised in King—that individuals who purchase insurance on the federal government’s healthcare exchange are not entitled to the tax subsidies available to those purchasing on state exchanges—would, if accepted by the Court, have an impact on the ACA every bit as great as a decision striking down the individual mandate. That fact has caused some commentators to draw spurious parallels between the two cases. Many Obamacare partisans who dismissed the NFIB constitutional challenge as a “shameful” and hypocritical “solicitation of right-wing judicial activism,” are making the same accusation against the King challenge.

The accusations were inaccurate in NFIB; they are hopelessly wrong when applied to King. Before such unfounded criticism of King takes hold, it is important to emphasize major distinctions between the two cases. The petitioners in NFIB were asking the Court to take a decisive step: to strike down legislation adopted by Congress and signed by the President. Those petitioners, in my opinion, raised highly plausible (and indeed, partially successful) arguments in support of their constitutional claims. However, a majority of the justices—mindful of separation-of-powers concerns that arise whenever they are asked to override the will of Congress and the President—followed the Court’s long-held preference that, in the words of Chief Justice Roberts, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.”

King implicates no similar separation-of-powers concerns. If, as the plaintiffs argue, the IRS has adopted an unreasonable interpretation of the ACA’s tax subsidy provision, the Court is obligated to uphold the meaning Congress actually adopted in the ACA. It is not entirely implausible to argue that the IRS has reasonably interpreted the statute. But—as is attested to by the conclusions of at least three federal judges, including well-respected D.C. Circuit judges Thomas Griffith and A. Raymond Randolph—there is a strong basis for concluding that the phrase “an Exchange established by the State” does not include a healthcare exchange established by the federal government. Accordingly, a decision concluding that the IRS misinterpreted the statute’s meaning could not rationally be chalked up to “right-wing judicial activism.”

Obamacare supporters might well be correct that a desire to cut back on federal government intervention in the health insurance field motivates the King plaintiffs to a significant degree. But that motivation does nothing to undermine the validity of their statutory claims or their showing that the IRS’s alleged misinterpretation has caused them injury. The Court is merely being asked to interpret the meaning of a statute adopted by Congress, a task that ever since Marbury v. Madison has been well understood to be an appropriate exercise of judicial power. (“It is emphatically the province and duty” of the courts “to say what the law is.”).

Nor can Obamacare partisans legitimately accuse the Court of activism for agreeing to hear King in the absence of an existing split of authority among the federal appeals courts. The assertion that there is no split is subject to question: a D.C. Circuit panel issued a decision this summer rejecting the IRS’s interpretation; and while the en banc D.C. Circuit (newly packed with Obama appointees) agreed to rehear the case, it has never formally withdrawn the panel opinion. Besides which, the King petitioners pointed out, there were other compelling reasons for the Court to address the issue as soon as possible. While any decision striking down the IRS’s interpretation will cause disruption in the health insurance marketplace, the extent of the disruption will only increase the longer an erroneous interpretation remains in effect. If, as the Supreme Court apparently deemed likely, the numerous judicial challenges to the IRS’s interpretation would give rise to a clear circuit split that only the Court could resolve, it is far preferable for the Court to intervene now and thereby minimize any potential disruption.

Also published by Forbes.com on WLF contributor page

3 thoughts on “Why “King v. Burwell” Obamacare Case Is Not “NFIB v. Sebelius” Redux

  1. Pingback: Friday round-up | Authority Court

  2. Andrew Kamins

    Can you explain to me what the injury is here? Who exactly has standing to challenge this? Is the plaintiff somebody who is getting the subsidy but does not want it? It can’t be a challenge by a plaintiff claiming to be injured by someone else getting a subsidy that the plaintiff believes should not be available? A taxpayer cannot sue because she does not like the way her tax money is spent–there needs to be a particularized injury to have standing. And in this case, deference should be paid to the administrative agency, e.g. the IRS, which is interpreting a governing statute.

  3. Standing to challenge was always an issue, ever since the announcement of the IRS interpretation. It’s a good question. The short answer is that it’s not people receiving subsidies, nor some random taxpayers, who have standing to sue. It’s the employers of some people who receive supposedly-illegal subsidies. (I’m going from months-old recollections of the Adler/Cannon journal article on the topic, plus referring back to it just now.)

    By the Adler/Cannon interpretation, when an employee of a company with more than fifty employees receives a tax credit for purchasing insurance on an exchange, the employer is assessed a penalty of up to $2000 per worker, as part of the “employer mandate”. The employer must be subject to the mandate, and it must not provide sufficiently high-quality health insurance as to satisfy the mandate. Once those requirements are satisfied, we must know: has any employee been validly issued a tax credit? In the Adler/Cannon construction, that can never be the case for an employee in one of the thirty-odd states without an exchange.

    So to summarize: any employer hit with the employer mandate penalty, in a state without an exchange, should have standing to contest the validity of the subsidies, because their validity determines whether the employer mandate penalty can be assessed. That neatly avoids taxpayer-standing issues (and I agree that I don’t see how those could be overcome) and presents a particularized injury. The process to get there is obscure, but such is the nature of large bills like PPACA.

    If you want a fuller discussion of this, see page 73 (and the surrounding section) of the Adler/Cannon article. How to have standing was my biggest question before I started reading the article, but that question I think the article answers quite convincingly. (I’m still unsure about the rest of it — although more from not having yet taken the time to read and understand the relevant statutory clauses and their exact interplay, than from skepticism as to Adler/Cannon’s arguments, as yet.)

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