It was a big day for Obamacare advocates and adversaries as the Supreme Court heard oral arguments in the case that could potentially invalidate a key piece of the health care law that provides subsidized health coverage to millions of Americans.
The high stakes case of King v. Burwell will ultimately come down to how the Court interprets a sentence in the law that says federal tax subsidies are available to people “enrolled though an Exchange established by the State.”
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The plaintiffs contend that the statute should be read in plain English to conclude that subsidies are explicitly provided to people on the state exchanges—not the federal exchange. They suggest that this was intentional to incentivize states to build their own exchanges. The conservative wing of the Court, including Antonin Scalia and Samuel Alito, seemed to agree with the plain reading of the text during today’s arguments.
Separately, Justice Anthony Kennedy suggested that if the plaintiff’s claims were correct and the drafters did intend to exclude the federal exchange in order to persuade states to set up their own exchanges it could be an issue of "unconstitutional form of federal coercion,” as SCOTUS Blog noted.
The law originally allocated federal funding to states to cover the cost of setting up their own exchanges. However, just 16 states and the District of Columbia choose to set up their own exchanges, while 34 opted not to—people in those states instead use the federal exchange, HealthCare.gov.
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Right now, about 87 percent of Obamacare enrollees who signed up through the state and federal exchanges are receiving subsidies. If the Court sides with the plaintiff, an estimated 8 million people on the federal exchange will lose their subsidized coverage unless Congress amends the law’s language.
The Obama administration, for its part, claims that this was all a drafting error and that none of the law’s authors ever intended to exclude anyone from affordable coverage.
Solicitor General Donald Verrilli the administration’s lawyer on the case, said during oral arguments that the plaintiff’s claim contradicts “the administration’s promise to provide affordable health insurance for all Americans.” He encouraged the Court to consider the language in the broader context of the law.
The four liberal justices on the bench defended the law and distanced themselves from the plaintiff’s plain reading of the statute.
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"We look at the whole text. We don't look at four or five words," Associate Justice Elena Kagan said.
The decision will likely come down to a swing vote between Chief Justice John Roberts and Kennedy. Will Roberts step in to save Obamacare for a second time like he did in 2012? Or will he join the conservatives and take a “plain English” approach to interpreting the law.
Robert Bradner, of Washington-based Holland and Knight LLP explained it this way: “There are two philosophies around this—whether you just adopt a plain reading or whether you believe the Court has an obligation to try to save the statute. Bradner admitted that he would adopt the plain reading of the language—saying it was clear to him.
Then there’s the other group that argues the decision needs to be made in the broader context of the law. Is there any evidence to suggest that the law was always supposed to provide subsidies to everyone? And is there proof that the authors intended to punish states that didn’t set up their own exchanges?
Nicholas Bagley, a law professor at the University of Michigan and contributor at The Incidental Economist, offered a theory dispelling the plaintiff’s claim that the law was unfairly trying to punish states that didn’t set up their own exchanges.
“According to the plaintiffs, those seven words represent a congressional threat to the states: Either set up exchanges or lose billions of dollars in tax credits,” Bagley writes in The New York Times. “But would Congress really have issued a threat of this magnitude in such a backhanded way? When Vito Corleone in “The Godfather” made a man an offer “he couldn’t refuse,” he wasn’t subtle about it: “Either his brains or his signature would be on the contract.” That’s how you threaten somebody. The phrase “through an exchange established by the state” doesn’t cut it.
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In fact, officials from Virginia and 20 other states filed a brief to the Court that backs Bagley up—saying they never had any clue that states were facing this kind of threat.
“The States had no clear notice from the text, structure, purpose or history of the ACA that citizens in FFE States (federal exchange) would be denied premium assistance tax credits,” the states wrote in the brief.
In public, President Obama and other administration officials don’t seem too concerned about losing the case. Health and Human Services Secretary Sylvia Mathews Burwell said they don’t have a contingency plan in place in the event of an adverse ruling, and the president backed that up by saying they didn’t need one because there is “no plausible legal basis” for striking the down the subsidies.
"Look, this should be a pretty straightforward case of statutory interpretation," Obama told Reuters in an exclusive interview published Monday. "If you look at the law, if you look at the testimony of those who are involved in the law, including some of the opponents of the law, the understanding was that people who joined a federal exchange were going to be able to access tax credits just like if they went through a state exchange.
”However, some legal experts disagree and say the statute couldn’t be clearer. They predict that the Court will take a literalist approach based on what the sentence says—subsidies are for people enrolled in “exchanges established by the state.”
“The only question to be asked is, is the language plain or is it not…Right away in Section 13-11 of the law, it starts right out saying ‘states shall establish an exchange’” As Mark Rust, the managing partner of the Chicago office of Barnes & Thornburg, LLP, told The Fiscal Times earlier.
If the Court ultimately rules against the administration, Justice Samuel Alito suggested that it could potentially stay its ruling until the end of the year—meaning that the millions of people that stand to lose their coverage would have more time to figure out an alternative.
The Court is scheduled to make its decision in June.
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