Understanding The Obamacare Ruling

Almost everyone on both sides of the ruling in King v. Burwell thinks that it is obvious one way or the other.  It is not.

The key to understanding the ruling is to understand Chevron, the most cited supreme court case every year and possibly the most cited, ever.  It deals with ambiguous language, conflicting language, and flat-out typos.  With the explosion of the length of laws being passed at all levels of government, this happens all the time.

When faced with these ambiguities, the government agency assigned to implement the law makes decisions based on the intent of the law.  If challenged, the court asks two questions:

  1. Is the plain meaning of the language ambiguous?
  2. If so, what is the intent of the language given the context of the entire law?

The issue in King v. Burwell is a phrase buried in an appendix of the law that said tax subsidies can be given to poor people to buy insurance on exchanges established by the state.  The IRS decided that this was ambiguous and really applied to exchanges established by the states or federal government, who had to cover states that did not establish exchanges of their own.  A coalition of conservative think-tanks said, “No, it doesn’t.” and sued.

(They found four people from Virgina on whose behalf they sued.  No one believes the four people initiated the lawsuit.)

The plaintiffs have an obviously strong case, because “exchanges established by the state” is quite clear.  Thus, the “plain meaning” seems unambiguous.  If it doesn’t satisfy the first step of the above Chevron two-step test, then you don’t analyze the language in the context of the entire bill.

Imagine the following line from a hypothetical 1000 page bill on Pacific Ocean shipping regulations: “All states with shores on the east coast must establish offices to coordinate shipping traffic on the Pacific Ocean with Japan, China, and Australia.”  There is nothing ambiguous about that statement, either.  We know which states are on the east coast.  It is also clear what they are supposed to do.    Of course, everyone, literally every single person without exception, knows the writer meant west coast.

Since Obamacare was debated endlessly, with millions of words from congress on both sides, everyone knows that the writers of the law meant all exchanges.  However, this isn’t part of the Chevron test.   Also, that everyone should receive subsidies is patently obvious once you look at the context of the entire law.  However, that’s the second part of Chevron, and the second part doesn’t happen until you answer the first part.

We also know the whole system would collapse if only state exchanges received subsidies, but that is not part of Chevron either.  The solution to such a problem would be to pass a new law to correct the language.  In the current political environment, that wouldn’t happen and the system would fail.  But that consideration is also not part of Chevron.  The first Chevron test is simply: is the plain meaning of the language ambiguous?  Scalia, Thomas, and Alito said, “No”.

The majority went a different direction, saying Chevron doesn’t apply in this case.

But Chevron does not provide the appropriate frame-work here. The tax credits are one of the Act’s key reforms and whether they are available on Federal Exchanges is a question of deep “economic and political significance”; had Congress wished to assign that question to an agency, it surely would have done so expressly. And it is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort.

The majority is saying Chevron applies to minor ambiguities that are left to the relevant agencies.  The issue of subsidies is not minor, nor is the IRS the relevant agency.  Thus, they skip Chevron entirely to determine, for themselves, what this section of the law is supposed to mean.

They then argue that when the contested section is viewed in context of the entire law, it becomes ambiguous:

When read in context, the phrase “an Exchange established by the State under [42 U. S. C. §18031]” is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it could also refer to all Exchanges—both State and Federal—for purposes of the tax credits. If a State chooses not to follow the directive in Section 18031 to establish an Exchange, the Act tells the Secretary of Health and Human Services to establish “such Exchange.” §18041. And by using the words “such Exchange,” the Act indicates that State and Federal Exchanges should be the same.

Now that they have established that it is ambiguous, they go into the text of the law to determine its meaning.  They find overwhelming evidence that the writers of the law meant to extend subsidies to everyone, because, well, that was the one point obvious from the beginning.

Does Chevron apply in this case?  Could you not make a similar argument to its ambiguity without abandoning Chevron?  The issue was tax subsidies, so wouldn’t the IRS have expertise in crafting tax subsidy policy?  I don’t know.  There were also Federalism issues involved; it is not appropriate (possibly unconstitutional) to hide from the states materially important information in the fine print of major legislation.  This did not end up to play a crucial role in the logic.

It seems that everyone’s opinion of the ruling is really just a reflection of their opinion of Obamacare, with the possible exception of one person really worried about their legacy as a supreme court chief justice if they were to overturn the signature achievement of the current administration.

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