King v. Burwell: Judicial Branch Should Judge, Not Legislate | Citizens Against Government Waste

King v. Burwell: Judicial Branch Should Judge, Not Legislate

The WasteWatcher

On Wednesday, March 4, 2015, the Supreme Court heard oral arguments to King v. Burwell.  It is one of four lawsuits that challenge the IRS’s regulation that allows subsidies to assist people to purchase health insurance in Federally-facilitated Exchanges under the Affordable Care Act (ACA), better known as ObamaCare.  The plaintiffs argued that the plain language of the law only allows subsidies to assist people in an Exchange “established by a State” while the Obama administration is arguing the IRS was correct when it decided to provide subsidies for enrollees in both types of Exchanges.  The Exchanges are the on-line marketplaces where people can shop and purchase health insurance. The Supreme Court heard the case because there have been conflicting rulings within the lower courts as to whether the IRS acted legally.

If the Supreme Court agrees with the plaintiffs that the statute means what it says and subsidies can only go to people in a state-established Exchange, about 7.5 million citizens in as many as 37 states without such an Exchanges will lose would what be considered illegal subsidies.  There will be no impact on the enrollees in the 13 states with a state Exchange.  However, there would be an immediate and dramatic increase in premiums for those in the other states, causing many of them to drop coverage.  Deciding the case for the plaintiffs would also substantially undermine and perhaps cause the collapse of ObamaCare.

During oral arguments, the two swing votes in the case, Chief Justice Roberts and Justice Kennedy, indicated that the Court’s decision may end up relying on the precedent of a prior Supreme Court case, Chevron v. Natural Resources Defense Council, which would support the IRS’s decision based on the executive branch’s ability to issue regulations in order to reasonably resolve a statutory ambiguity within the overall context of the ACA.  In other words, despite the clear wording that the subsidies only go to people in an Exchange established by the state, it would be within the IRS’s purview to interpret the law to permit the agency to provide subsidies for anyone signing up for ObamaCare.

Another potential case favoring the upholding of the subsidies is South Dakota v. Dole, which held that Congress may only condition the states’ receipt of federal funds unambiguously.  Using Dole would mean the Court views the subsidies as going to the states themselves, not to the individual enrollees.

If Chevron case is the precedent for upholding the subsidies, Justices Roberts and Kennedy were concerned that a future administration and IRS could simply undo them with a new regulation.  Relying on the Dole case, would still be a win for the government but analysts believe it would prevent that from occurring.

Others believe that if Chief Justice Roberts found that a tax existed in the ACA where many thought it didn’t in the first case before the court that challenged ObamaCare (National Federation of Independent Business v. Sebelius), this case is an easier lift for him because of the Chevron and Dole precedents, and may even bring over Justice Kennedy, who voted against the government in that first case.


Under ObamaCare, taxpayer-funded subsidies are provided to assist people and families with house-hold incomes up to 400 percent ($95,400 for a family of four) of the federal poverty level to purchase health insurance.  The plaintiffs in King v. Burwell live in a state (Virginia) that did not establish an Exchange and approximately 165,000 of its citizens in 2014 purchased their health insurance via that is run by the Centers for Medicare and Medicaid.  Approximately 76 percent are eligible for subsidies in 2015.  Because the subsidies trigger the mandates and tax penalties for not purchasing insurance and the IRS is providing illegal subsidies in their state, the plaintiffs argue they are being harmed by ObamaCare.

King v. Burwell

There are three relevant ACA sections in the case:  1311, 1321, and 1401.

  • Section 1311 states, “An Exchange shall be a governmental agency or nonprofit entity that is established by a State…”
  • Section 1321 provides a fallback position should a state decide not to establish an Exchange.  ACA states “the Secretary [of Health and Human Services] shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State.”
  • Section 1401 authorizes the subsidies to be distributed to cover individuals and families “which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act.”

According to the plaintiffs’ argument, “Congress used a variety of ‘carrots’ and ‘sticks’ to induce states to establish Exchanges voluntarily.  For example, the Act authorizes federal grants to states for ‘activities … related to establishing an [Exchange]… and “it also penalizes states that do not create Exchanges, such as by barring them from narrowing their state Medicaid programs until ‘an Exchange established by the State … is fully operational.’”

The plaintiffs argued that the ACA’s legislative history shows that Congress intended that subsidies only go to people enrolled in Exchanges established by the states.  Two Senate Committees wrote healthcare reform bills in 2009.  The Senate Health, Education, Labor, and Pensions (HELP) Committee created “Gateways” that were to be established by the states and also created a federal Gateway in case a state did not. The bill indicates that patients in both Federally-facilitated and state-created Gateways would receive a subsidy.  The Senate Finance Committee also wrote legislation and created “Exchanges.”  In this version, the tax subsidies were available in an “Exchange established by the state” but had no federal fallback Exchange in case a state did not create an Exchange as did the HELP legislation.  These two bills were merged by staff from the HELP and Finance Committees, the White House, and Senate Majority leadership.  Most of the merged legislation, which became the Patient, Protection and Affordable Care Act (ACA), retained the Finance bill language but added the federal fallback Exchange.  It did not add the language stating the subsidies would go to Federally-created Exchanges.

MIT professor Jonathan Gruber, who was hired by the White House as an advisor during the healthcare debate, was loaned to Congress during the crafting of the legislation, and is often called the "architect of ObamaCare."  He has remarked on at least three occasions that the purpose of providing the subsidies only to people utilizing state Exchanges was to courage governors to create them.  In particular, Professor Gruber said during a January 2012 presentation (@31:25) at Noblis, a nonprofit science, technology, and strategy organization, “I think 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.  But your citizens still pay the taxes that support this bill.  So you’re essentially saying to your citizens you’re going to pay all the taxes to help all the other states in the country.  I hope that that's a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these Exchanges and that they’ll do it, but you know, once again the politics can get ugly around this.”

While the Court will settle the law, the politics have gotten ugly and will remain so regardless of how the Court decides. 

ObamaCare has been a disaster since October 2013 when the state-run Exchanges and were first rolled out.  For example:

  • The Obama Administration has, according to the Galen Institute, changed the ACA 49 times with the President making at least 30 revisions without Congressional approval.  Several changes, such as delaying the employer mandate, have been done strategically to get past an election.
  • The promise by President Obama that “if you like your plan, you can keep your plan,” became PolitiFact’s “Lie of the year” in 2013.
  • The President promised premiums would drop by an average of $2,500 per family per year but instead, they have increased by more than $3,065 per year.  Americans have seen the cost of their individual health insurance policies increase by 49 percent.
  • Hundreds of thousands of taxpayers are facing the fact they must return money to the IRS because they received a subsidy to help purchase a health insurance policy and later had an increase in their income making them ineligible for the subsidy.
  • In February, 2015, 800,000 individuals on ObamaCare were notified by the Obama Administration that information used to figure out the subsidies on their tax forms was incorrect and that they should delay filing their taxes until they get the correct information.

The government’s unremitting mismanagement is one of the major reasons ObamaCare continues to have an average disapproval rating of 52 percent, according to an ongoing poll by Real Clear Politics.  If fact, the law never had an average popularity rating above 43 percent.

With the general public distaste toward ACA, it should be no surprise the Obama administration and Democrats, who solely wrote and passed the law, are anxious about Republicans now having an opportunity to change it.  They are desperately looking to the Supreme Court to keep the status quo with a ruling that the IRS regulation is legal.

In an interchange during the oral argument before the Supreme Court, Solicitor General Verrilli, arguing for the Obama administration, stated that the plaintiffs’ reading of the law, “produces an incoherent statute that doesn’t work” and “forces HHS to establish rump Exchanges that are doomed to fail” and “it revokes the promise of affordable care for millions of Americans.  That cannot be the statute that Congress intended.”  Justice Antonin Scalia responded, “Of course it could be.  I mean, it may not be the statute they intended.  The question is whether it’s the statute that they wrote.  I mean, you know, there are no provisions in that statute that turn out to be ill considered and ill conceived?”  He goes on to say, “There are no statutes that make no sense?”

Of course, Congress changes and fixes bad policy in laws all the time as Justice Scalia later pointed out.  After a discussion of whether there would be harm if the Court should agree the law is what it says, Solicitor General Verrilli said that the “tax credits will be cut off immediately” and there would be “very significant, very adverse effects immediately for millions of people in many States in their insurance markets.”  Scalia responded, “What about Congress?  Do you really think Congress is just going to sit there while all of these disastrous consequences ensue? I mean, how often have we come out with a decision such as you know, the bankruptcy court decision?  Congress adjusts, enacts a statute that takes care of the problem.  It happens all the time.  Why is that not going to happen here?”

That is precisely what is happening.  Congress is preparing to react if the Court should rule that the law means what it says.  Several pieces of legislation are being formulated and some have been introduced.  Some are full repeal and replace bills, while others may act as a temporary “patch” to assist people financially that may lose their subsidies until a more comprehensive, free-market oriented legislation can be signed into law.  In addition to Congress crafting legislation, healthcare policy experts have also offered ideas that could be utilized.  

Furthermore, if the Supreme Court rules in favor of the plaintiffs, nothing prevents any of the 37 states from establishing an Exchange.  However, considering the huge expense and disastrous results after some state Exchanges collapsed, such as Oregon’s and Maryland’s Exchanges, many states may continue not to create one.  Furthermore, some health policy experts have argued that if the Supreme Court rules with the plaintiffs and their citizens can no longer obtain the illegal subsidies, then the taxes would not be triggered and they would be free to purchase health insurance that does not comply with ObamaCare’s onerous mandates.

Supporters of the plaintiffs believe a Supreme Court ruling in their favor would re-affirm Congress’s Constitutional role.  Congress writes the laws, not the Executive Branch and not the Judiciary.  The Court could make it clear that it the Executive Branch is presented with a law that is poorly written, it cannot issue regulations that contravene the plain language of the statute, and the courts cannot rule that Congress meant something that it did not say.

Perhaps Senators Orrin Hatch (R-Utah), Lamar Alexander (R-Tenn.) and John Barrasso (R-Wyo.) put it best when they wrote an op-ed in the March 1, 2015, Washington Post about the plan they are crafting in response to a Supreme Court ruling in favor of the plaintiffs:

“We all agree ObamaCare is a mess.  But Wednesday [March 4, 2015), ObamaCare will not be the key issue before the court.  The key issue is whether the administration can unilaterally rewrite laws passed by Congress to meet its political objectives.  We hope the court will protect the delicate balance of powers between the three branches of government.

Such a ruling would also give Congress an opportunity — to stop ObamaCare’s damage and create a pathway to reforms that move our health-care system in the direction of freedom, choice and lower costs.”

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