King v. Burwell – Subsidies on federal exchanges will survive

Predicting the outcome of a Supreme Court decision based upon questions asked at oral argument (and the responses to those questions) is a hazardous undertaking.  The law books are filled with cases in which the party which “won the argument” lost the case.  Nevertheless, a prediction of the outcome of King v. Burwell, which was argued before the Court on March 4, can be made with considerable confidence: the federal government will prevail in King, perhaps by a reasonably comfortable 6-3 margin.  This will mean that insurance subsidies will be preserved for otherwise eligible purchasers of health insurance under the Affordable Care Act without regard to whether they purchase their insurance on a federally established or a state established health insurance exchange.

The arithmetic rationale for this prediction is straightforward.  The government starts with four solid votes in support of its position (Justices Ginsburg, Breyer, Sotomayor, and Kagan).  From there, the government needs only one other vote (either Chief Justice Roberts or Justice Kennedy), and has a more than reasonable chance of getting both of those votes.  Plaintiffs, on the other hand, start with only three votes (Justices Scalia, Thomas, and Alito) and has no apparent path to get to a majority of five.  Plaintiffs are highly unlikely to have both the Chief Justice and Justice Kennedy side with the plaintiffs (and the more likely outcome is that neither will). 

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As is well known and has been reported widely, King is a statutory construction case.  The core legal question is whether the text, structure, intent of the ACA dictate the result plaintiffs urge that Congress intended for subsidies to be available only to those who purchase insurance on a state exchange while excluding those who purchase insurance on a federally established exchange.  As it turns out, 34 states did not establish state exchanges.  This means that the direct consequence of plaintiffs’ challenge, if it were to prevail, is that all of the persons who purchased insurance through the federal exchange in those 34 states – approximately five million people in 2014 – would lose their subsidies and, ultimately, the vast majority of those five million people would lose their insurance because they could not afford to purchase the insurance without the subsidies. 

The oral argument before the Supreme Court moved back and forth between principles of statutory construction, specifically plain language versus overall congressional intent, and the consequences if plaintiffs’ position were to prevail.  Plaintiffs had much to say about how the plain language supported their position and a credible argument trying to square their position with the asserted intent of Congress.  As for the consequences of their position, however, plaintiffs had little to say and their arguments on the point did not get traction.  Plaintiffs were largely stumped by questions directed at the real world implications of a Supreme Court decision in their favor. 

This meant that whenever the justices were asking questions about consequences, and there were a good number of those questions, the plaintiffs were losing.  Justice Kennedy, for example, pressed the idea that the consequence of the plaintiffs’ position was that “the States are being told either create or your own Exchange [which 34 did not], or we’ll send your insurance market into a death spiral.”  Justice Kennedy expressed concern that this would constitute improper coercion of states.  Plaintiffs had no effective response.  The government’s argument, by contrast, was bolstered by emphasizing the consequences of plaintiffs’ position.  As the Solicitor General argued, “the tax credits will be cut off immediately and you will have very significant, very adverse effects immediately for millions of people in many states in their insurance markets.”  There is no obvious answer to that argument and, in any event, plaintiffs did not have one.    

Justice Scalia attempted to supply an answer for plaintiffs.  Justice Scalia postulated that Congress would step in to fix the problems identified by the government and plainly embraced by a number of justices: “What about Congress?  You really think Congress is just going to sit there while – while all of these disastrous consequences ensue?”  The Solicitor General responded “well, this Congress, I ….,” a response which generated laughter.  Laughter was an appropriate response. 

A congressional “fix” of the ACA by the current Congress is a purely theoretical, if not fictional, proposition.  In a more-or-less normal political world, the expectation would be that Congress would step in to prevent the harsh consequences of an adverse judicial decision interpreting a statute, but there is nothing normal about our current state of congressional dysfunction; no one, including the justices of the Supreme Court, can reasonably believe that this Congress would enact a “fix” to make ACA subsidies available to people who purchase insurance on a federal exchange.  The Court cannot, therefore, avoid responsibility for the consequences – all of them – of a decision upholding plaintiffs’ challenge.  That is a heavy burden and is not a burden for which plaintiffs offered either an adequate reason or a plausible explanation for how those consequences might be mitigated.      

In the end, there is more than enough merit to the government’s statutory interpretation position and the disastrous consequences are certain if plaintiffs’ position were adopted.  The government’s position will command at least the necessary five vote majority.  The Court is not going to blow up the ACA, create chaos in 34 states, and leave millions of people without insurance because of what is, at most, in artful or sloppy legislative drafting in a single provision of a lengthy and complex statute.  The consequences are too great and the argument for imposing those consequences was shown to be thin and inadequate. 

Tyler, a partner at Venable LLP, served as chief counsel at the FDA and insurance commissioner for the state of Maryland.