Tuesday, February 17, 2015

The Incredible Shrinking Lawsuit: The Decomposition Of King v. Burwell

Guest Blogger

Rob Weiner

A monument on the Civil War battlefield at Gettysburg identifies the “high water mark of the Confederacy,” where General Pickett’s charge temporarily breached the front lines of the Union Army.  A significant issue in that War was the refusal of Southern states to accept the result of the Presidential election.  The Union’s ultimate victory vindicated the principle of majority rule within our constitutional system.
More than 150 years later, this democratic principle is still under siege—not by force of arms, but by the persistent efforts of the losers in legislative battles who seek to overturn the majority vote in the courts.  Nowhere are those efforts more relentless and dogmatic than in the profusion of lawsuits challenging the Affordable Care Act.

The challenges, however, hit their own high water mark when the Supreme Court granted review in King v. Burwell.  Since then, the challengers’ claims, which were insubstantial to start with, have evaporated, laying bare both the absence of any coherent legal basis for the claims and the political nature of the litigation.
The challenges focus on the State insurance Exchanges required under the ACA.  An Exchange is essentially a Travelocity for insurance, where individuals can compare prices, find the best deal, and purchase their insurance.  Section 1311 of the ACA requires all States to establish an Exchange.  If a State does not establish the “required Exchange,” however, Section 1321 of the Act instructs the Secretary of HHS to establish “such Exchange” for the State. 
The ACA expressly articulates the purpose of these Exchanges and of the insurance reforms the Act adopts—“Affordable Care for All Americans.”  To that end, the ACA mandates that individuals obtain health insurance, and it grants low-income families tax subsidies so they can afford to do so.  The subsidies provision, Section 36B of the Tax Code, first directs that a tax credit “shall be allowed” for non-elderly Americans with incomes between 100 and 400 percent of the federal poverty level.  But then another sub-subsection calculates the amount of the subsidy based on the cost of insurance purchased on “an Exchange established by the State under Section 1311,” followed by a sub-subsection that uses the same phrase in calculating the months of coverage.  Isolating that last phrase—“Exchange established by the State”— the challengers assert that low income families in states with Exchanges established by the Secretary of HHS cannot receive subsidies, or more precisely, that the amount of their subsidies is zero, because the Secretary is not “a State.” 
The simplicity of the argument, though alluring, is deceptive.  As the Government notes in its response, the disputed provision—when read in harmony rather than in conflict with the entire 900-page statute—merely makes the Secretary the surrogate of the State in establishing an Exchange.  An Exchange established by the Secretary in lieu of the State is “such Exchange”—the legal equivalent for purposes of the statute of an Exchange established by the State.  Adopting the challengers’ contrary interpretation not only would disable numerous provisions of the ACA, but also would defeat the central purposes of the Act.

The Fourth Circuit agreed that the subsidies were available in all States, and ruled for the Government.  A divided panel of the D.C. Circuit held for the challengers, but the entire Court then vacated the ruling and granted rehearing en banc.  Thus, come late December, there was no conflict between the Circuits—generally a prerequisite for Supreme Court review.  The Court granted review anyway.  That was an ominous sign for the Government and the high water mark for the challengers.

Since then, however, the tide has rapidly receded.  As scholars, journalists, and legal advocates have dug into the case, each day seems to bring a new development undermining the challengers’ claims.  For example, the challengers argue that Congress threatened the loss of subsidies in order to coerce States into setting up Exchanges.  But in an amicus brief supporting the Government, 22 States and the District of Columbia—including 10 States with a Federal Exchange—pointed out that accepted principles of federalism prevent Congress from imposing such a condition without clearly putting the States on notice.  Not one of the 22 States (and DC) perceived the supposed threat, proving at the very least that the statute failed clearly to convey one.  Beyond that, the mere fact of support for the Government from nearly half the States, compared to seven supporting the challengers, and the rest, including the largest States with Federal Exchanges––Texas, Florida and Michigan—sitting on the sidelines, deflates the challengers’ self-anointed status as champions of federalism.

Another example of the erosion of the challengers’ case involves their claim that coercing the States into establishing Exchanges was necessary in order to satisfy Senator Ben Nelson, the crucial 60th vote needed to overcome a filibuster of the ACA.  Senator Nelson, the challengers told the D.C. Circuit, insisted that, “We are not going to have a federally run exchange.  We are going to implement basic principles of federalism and the states are going to run those exchanges or I don't vote for it and it doesn't get passed.”  There is, however, no record of Senator Nelson ever saying that.  And now he has confirmed just the opposite.  In a January 27, 2015 letter to Senator Casey, Nelson wrote that he never intended to penalize States for defaulting to a Federal Exchange.  Further, he stated:  I always believed that tax credits should be available in all 50 states regardless of who built the exchange, and the final law also reflects that belief as well.  The anti-ACA advocates’ first tack in response was to deny that they had ever made the supposed deal with Senator Nelson central to their claim, an assertion reminiscent of Yogi Berra’s quip, “I never said all the things I said.”  The ACA opponents also cited an earlier statement by Senator Nelson that he had not focused during the Congressional debate on the availability of subsidies in States with Federal Exchanges.  Of course he didn’t.  It wasn’t an issue.  The participants, including Senator Nelson, believed that subsidies would be available in all States, which explains why they so frequently used the word “all” in describing the benefits of the ACA, and why the challengers have found no contemporaneous statement to the contrary.

Moreover, yet another piece of corroborating evidence surfaced recently, an email dated January 12, 2010, from a Senate staffer who worked on the legislation adopted by the Senate two-and-a-half weeks earlier.  Columnist Jonathan Cohn asked him:
under senate bill, can states opt out of (a) medicaid expansion (b) exchanges? And if so was that done to make nelson happy?” 
The staff member responded,
“No on Medicaid. 
Yes on Exchange -- but then the feds come in and do it instead. 
Neither for Nelson.”

So much for the Nelson theory.

In other respects as well, the ACA opponents are having trouble keeping their legal theories straight.  Since the grant of review in King, a January 2010 article by Senator Hatch resurfaced criticizing the ACA provisions on Exchanges.  Senator Hatch maintained that a State’s decision to set up an Exchange “is not a condition for receiving federal funds, which would still leave some kind of choice to the states.”  The Exchange provision, he continued, makes States mere “subdivisions of the federal government” because it “requires states to establish these exchanges or says that the Secretary of Health and Human Services will step in and do it for them.”  That is not the challengers’ coercion theory.  In fact, it is a direct rebuttal.

Likewise, a 2011 video came to light in which Republican Senator John Barrasso, while touting legislation allowing States to opt out of the ACA, was asked whether residents of opt-out States could receive subsidies.  Senator Barrasso responded that as long as those residents paid taxes, “they’re not going to give up that right to have an opportunity to use that money.”  To “give up” a right, one generally must have it in the first place, and the challengers now claim that these residents did not have such a right.
Whether or not this new information is the traditional stuff of statutory interpretation, it confirms why the dogs did not bark in 2009 and 2010; that is, why the challengers have found no pre hoc articulation of their post hoc interpretation of the Act.  There was a common understanding that subsidies were available in all States.  And that is not surprising: in the last Supreme Court case involving the ACA, the dissenting Justices recognized that the subsidies were essential to enable an Exchange to function: “[w]ithout the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges,” and insurers would likely “be unwilling to offer insurance inside of exchanges” if they were no longer the exclusive means of reaching subsidized customers.  “With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all.”  Exchanges without subsidies would be doomed to fail—and there is no reason that Congress would have created a federal fallback with such a fatal flaw.

Given this common understanding, given the Government’s reasonable—indeed, compelling—textual interpretation reflecting that understanding, and given the violence the challengers’ reading would inflict on the statute, it would be acutely anti-democratic to use this artifice to accomplish what the challengers have been unable to achieve in Congress or even in the constitutional litigation.  It would substitute the views of unelected judges for the majority vote of democratically elected legislators.  It would, in the ACA opponents’ own words, “drive a stake through the heart of Obamacare.”  And it would do so in a case brought by parties with no injury or interest besides ideological animus, who would impose serious injuries on millions of low-income families not before the Court.

In sum, the developments since the high water mark when the Court granted review in King do not merely undermine the Petitioners’ claims.  They also highlight the significance of the case to the democratic principles at the core of our constitutional system, and, accordingly, to the legitimacy the public accords the Court’s decisions.

Rob Weiner, formerly Associate Deputy Attorney General in the United States Department of Justice, is a partner at Arnold & Porter LLP. You can reach him by e-mail at robert.weiner at

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