Search­ing for clues on how the Supreme Court would rule on sub­si­dies

Modern Healthcare - - NEWS - By Joe Carl­son

The Obama ad­min­is­tra­tion hopes the lat­est le­gal chal­lenge to the Pa­tient Pro­tec­tion and Af­ford­able Care Act never reaches Chief Jus­tice John Roberts and his col­leagues on the U.S. Supreme Court. But some le­gal schol­ars say there’s rea­son to think that past opin­ions by con­ser­va­tive jus­tices would sup­port the ad­min­is­tra­tion’s in­ter­pre­ta­tion that the law al­lows pre­mium sub­si­dies through Health­

Last week, fed­eral ap­pel­late courts in the District of Columbia and Vir­ginia is­sued clash­ing rul­ings on the ques­tion of whether the text of the health­care re­form law pro­vides sub­si­dies to buy in­sur­ance through the fed­eral ex­change serv­ing 36 states, rather than pro­vid­ing them solely though state-es­tab­lished ex­changes. The D.C. court, in a 2-1 panel rul­ing in Hal­big v. Burwell, held that the law clearly does not al­low sub­si­dies through the fed­eral ex­change and there­fore the In­ter­nal Rev­enue Ser­vice could not in­ter­pret the law to per­mit them. In con­trast, the Vir­ginia court panel unan­i­mously ruled in King v. Burwell that the law was am­bigu­ous and the agency there­fore had the au­thor­ity to al­low sub­si­dies.

Based on the split rul­ings, the is­sue may be headed to the high court, which could rule by next June—by which time mil­lions of Amer­i­cans in the 36 states will be re­ceiv­ing sub­stan­tial pre­mium as­sis­tance.

Even though the high court of­ten is­sues de­ci­sions in­volv­ing statu­tory in­ter­pre­ta­tion, few le­gal ex­perts would go on record pre­dict­ing how the ma­jor­ity would rule, par­tic­u­larly given the po­lit­i­cal po­lar­iza­tion around Oba- macare. “I think it could go ei­ther way,” said Ge­orge Ma­son Univer­sity law pro­fes­sor Ilya Somin, an ad­junct scholar at the lib­er­tar­ian Cato In­sti­tute, which sup­ported the chal­lenge to the sub­si­dies. “You have rea­son­ably plau­si­ble ar­gu­ments on both sides, and ob­vi­ously you have an ar­gu­ment that is very po­lit­i­cally charged.” The le­gal ques­tion cen­ters on the pre­cise word­ing in the ACA de­scrib­ing eli­gi­bil­ity for the sub­si­dies. The law says sub­si­dies to pur­chase in­sur­ance through an ex­change will be pro­vided to in­di­vid­u­als and fam­i­lies who got in­sur­ance “through an ex­change es­tab­lished by the state.” The IRS is­sued a rule in­ter­pret­ing that to mean any health in­sur­ance ex­change, not just the state-run ex­changes.

In Hal­big, the di­vided D.C. court panel agreed with re­form op­po­nent’s ar­gu­ment that the IRS did not have the dis­cre­tion to hand out pre­mium tax cred­its in states us­ing the fed­eral ex­change. Two Repub­li­can-ap­pointed judges struck down the IRS rule, with a Demo­crat­i­cap­pointed judge dis­sent­ing. The Obama ad­min­is­tra­tion im­me­di­ately said it would ask for a re­hear­ing be­fore the full D.C. ap­peals court, which has a ma­jor­ity of Demo­cratic-ap­pointed judges.

Plain­tiffs in the Hal­big case and three sim­i­lar cases ar­gue that the law’s Demo­cratic au­thors in­tended to limit the avail­abil­ity of the sub­si­dies to staterun ex­changes to pres­sure states into es­tab­lish­ing their own mar­ket­places, though there is lit­tle or no leg­isla­tive his­tory show­ing that. The law’s sup­port­ers, how­ever, say the am­bi­gu­ity is due to a draft­ing er­ror re­sult­ing from the tor­tu­ous process of pass­ing the bill, which did not al­low any re­vi­sions.

The Supreme Court’s con­ser­va­tives touched on the is­sue of Congress’ in­tent re­gard­ing the pre­mium tax cred­its in their dis­sent in Na­tional Fed­er­a­tion of In­de­pen­dent Busi­ness v. Se­be­lius, the 2012 case that up­held the law’s in­di­vid­ual man­date. Ac­knowl­edg­ing the cen­tral­ity of the sub­si­dies to the law’s func­tion­ing, the four dis­senters wrote that with­out the fed­eral

sub­si­dies “the ex­changes would not op­er­ate as Congress in­tended, and may not op­er­ate at all.”

Ex­perts say it’s not clear the Supreme Court would take the case if the full D.C. ap­peals court re­verses the three-judge panel and up­holds the le­gal­ity of the IRS rule al­low­ing sub­si­dies on the fed­eral ex­change. Such a de­ci­sion would elim­i­nate any split among the ap­peals courts about the is­sue, though two sim­i­lar suits have yet to be de­cided by trial judges or ap­peals courts in other cir­cuits.

On the other hand, if the los­ing plain­tiffs in the Vir­ginia case ask the high court for ex­pe­dited han­dling, jus­tices ea­ger to re­solve the sub­sidy ques­tion be­fore more Amer­i­cans sign up for cov­er­age in Novem­ber could put the case on its docket this fall. All it takes is four jus­tices to vote to ac­cept a case, and it’s clear there are at least four Oba­macare skep­tics on the court. Still, it would be highly un­usual for the court to ac­cept the Vir­ginia case while the full D.C. ap­peals court was still con­sid­er­ing the case, said Wash­ing­ton & Lee Univer­sity law pro­fes­sor Tim Jost.

The D.C. ap­peals court ma­jor­ity rec­og­nized the se­vere con­se­quences of its rul­ing, say­ing they reached their con­clu­sion “with re­luc­tance.” But they said they had no other choice. “Our rul­ing will likely have sig­nif­i­cant con­se­quences both for the mil­lions of in­di­vid­u­als re­ceiv­ing tax cred­its through fed­eral ex­changes and for health in­sur­ance mar­kets more broadly. But, high as those stakes are, the prin­ci­ple of leg­isla­tive supremacy that guides us is higher still … Congress is supreme in mat­ters of pol­icy, and the con­se­quence of that supremacy is that our duty when in­ter­pret­ing a statute is to as­cer­tain the mean­ing of the words of the statute.”

Much of the le­gal anal­y­sis in the two ap­pel­late opin­ions fo­cused on a land­mark 1984 Supreme Court case, Chevron USA v. Nat­u­ral Re­sources De­fense Coun­cil, which held that fed­eral agen­cies must fol­low the let­ter of the law where the law is clear. But if courts us­ing the Chevron anal­y­sis con­clude that a law is am­bigu­ous, then judges are re­quired to give strong def­er­ence to an agency’s in­ter­pre­ta­tion of the law.

While the D.C. ap­peals panel held that the ACA was so clear that no Chevron anal­y­sis was needed, the 4th Cir­cuit panel ruled that the IRS had the au­thor­ity to make the in­ter­pre­ta­tion it did be­cause the law in its en­tirety was am­bigu­ous and per­mit­ted for mul­ti­ple in­ter­pre­ta­tions. “We can­not dis­cern whether Congress in­tended one way or another to make the tax cred­its avail- able on HHS-fa­cil­i­tated ex­changes,” the panel, com­posed of three Demo­crat­i­cap­pointed judges, wrote. “The rel­e­vant statu­tory sec­tions ap­pear to con­flict with one another, yield­ing dif­fer­ent pos­si­ble in­ter­pre­ta­tions. In light of this un­cer­tainty, this is a suit­able case in which to ap­ply the prin­ci­ples of def­er­ence called for by Chevron.”

But would the high court jus­tices see the ACA’s sub­sidy lan­guage as am­bigu­ous? The court reg­u­larly is­sues opin­ions in­volv­ing Chevron analy­ses that may of­fer clues. Last month in Util­ity Air v. En­vi­ron­men­tal Pro­tec­tion Agency, Jus­tice An­tonin Scalia, writ­ing for the ma­jor­ity, said the EPA could not dra­mat­i­cally ex­pand the scope of its air pol­lu­tion reg­u­la­tions with­out a clear sig­nal from Congress to do so. “We reaf­firm the core ad­min­is­tra­tive-law prin­ci­ple that an agency may not re­write clear statu­tory terms to suit its own sense of how the statute should op­er­ate,” he wrote.

But Scalia went on to write that “the fun­da­men­tal canon of statu­tory con­struc­tion (is) that the words of a statute must be read in their con­text and with a view to their place in the over­all statu­tory scheme.”

Words like that of­fer hope to Oba­macare sup­port­ers.

Jus­tice Scalia’s lan­guage in the EPA de­ci­sion is one pos­si­ble in­di­ca­tor of how the high court could rule.

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