Thursday, July 24, 2014

Halbig, King, and the Limits of Reasonable Legal Disagreement

Neil Siegel

I participated in the debates over the constitutionality of the Affordable Care Act (ACA). Although I thought the federal government had substantially stronger arguments on its side, I did not dismiss the arguments of those who disagreed with me. There often has been reasonable, irreconcilable disagreement over the meaning of the Constitution, and the Supreme Court had never before allowed Congress to impose a purchase mandate under the Commerce Clause or an exaction labeled a penalty under the Taxing Clause. I thought the “Lopez question” required an answer.

Halbig and King (plus the Indiana and Oklahoma cases) are different. I can accept as reasonable, even if ultimately unpersuasive, the argument that the relevant provisions of the ACA are ambiguous. What I cannot accept as reasonable or responsible, however, is the argument—accepted by the D.C. Circuit panel majority in Halbig—that the ACA Congress clearly and unambiguously accomplished what no Member of Congress, no one in the Congressional Budget Office, none of the four dissenting Justices in NFIB v. Sebelius, and no state official realized that Congress had accomplished when it passed the ACA: self-destructively limit the tax subsidies that make health insurance affordable for millions of Americans to those who have the good fortune of happening to reside in states that set up their own health insurance exchanges.

Yes, the statute provides that the subsidies are to be calculated in part based on the cost of the monthly premium for the health insurance plan that an individual buys “through an Exchange established by the State under [Section] 1311” of the ACA. 26 U.S.C. §36B(b). But for goodness sake, that is an odd place in the statute for Congress to say—no, for Congress to whisper—that subsidies are not available in federally facilitated exchanges, thereby placing the viability of the entire statute in jeopardy if state officials decline to create exchanges. The part of the law that determines who is eligible for the subsidies—as opposed to how they are to be calculated—does not distinguish between state and federally facilitated exchanges. See 26 U.S.C. §36B(a).

More importantly, Section 1311 purports to require each state to establish an exchange: “Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange (referred to in this title as an ‘Exchange’)[.]” The section then defines an “Exchange” as an entity that necessarily has been established by a state: “An Exchange shall be a governmental agency or nonprofit entity that is established by a State.” See also § 1563(b) (stating that “[t]he term ‘Exchange’ means an American Health Benefit Exchange established under [§] 1311”). Section 1321 later makes plain that Section 1311 must be taken stipulatively, not literally. That is, a state may, as a matter of fact, “elect” to establish an exchange or not, and if it does not, then the federal government “shall . . . establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements” (my emphasis).

In other words, the part of the ACA that uses the “established by the State” language asserts by definition, regardless of the fact of the matter, that the state is establishing the exchange. Another part of the statute directs the federal government to stand in the shoes of the state—to be the state for purposes of the statutory language and structure—if a state as a matter of fact does not create an exchange.

No doubt, Congress could have been clearer. So what else is new? Cf. Bond v. United States, 134 S. Ct. 2077 (2014). And yes, that lack of perfect clarity may cause some interpreters reasonably to view the statute as ambiguous, as opposed to clearly favoring the government’s position. But it is not reasonable to conclude that the statute clearly and insanely says what the plaintiffs say it says.

In light of these straightforward statutory interpretation arguments, as well as other arguments offered by six of the eight federal judges to decide the question so far (including, by the way, a Republican appointee), how can it be maintained that the statute—as clear as day yet unbeknownst to anyone at the time—denies subsidies to individuals who purchase health insurance policies in federally run exchanges?

Some may conclude that I am not as tolerant of reasonable legal disagreement as I think I am or used to be. Others may conclude that I care too much about the draconian financial consequences for millions of Americans and insurance companies if this litigation succeeds.

I have considered these possibilities, and I have rejected them. The plaintiffs’ case is so weak and transparently political that it is dismaying to see it be taken seriously.