Supreme Court to rule on the proper reading of ObamaCare

Jeffrey Schwab

Jeffrey Schwab is a senior attorney with the Liberty Justice Center.

Jeffrey Schwab
March 5, 2015

Supreme Court to rule on the proper reading of ObamaCare

The fact that the government does not like the consequences of its actions is not a reason to ignore the clear meaning of the text of the Affordable Care Act.

Can the government rewrite its own law when it doesn’t like the consequences of the law as it was originally written?

That’s the question the U.S. Supreme Court considered during oral arguments on March 4 in the case of King v. Burwell.

After the passage of the Affordable Care Act, or ACA, the IRS adopted a rule that allows the federal government to issue tax credits to individuals in states which have set up their own health-insurance exchanges as well as individuals in states which have not set up their own health-insurance exchanges and get health insurance through the federal exchange. The problem is that the ACA only authorized tax credits for the purchase of insurance in exchanges “established by the State.” In King v. Burwell, the plaintiffs are challenging the IRS rule because it directly contradicts the text of the ACA.

King v. Burwell raises an important question of statutory interpretation – not a constitutional issue – for residents of Illinois and 33 other states, because those states have not established their own health-insurance exchanges. Therefore, certain consequences would result from a finding that the IRS rule is inconsistent with the text of the law.

One consequence would be that individuals and employers in those states would not be subject to the individual and employer mandates established by the ACA, which require them to purchase a government-mandated level of health-insurance coverage or pay a penalty to the IRS. This would be positive for two reasons. First, individuals in these states would not be subject to the penalty if they did not have health insurance or if they chose a plan that did not meet the federal standard. Second, the employer mandate discourages employers from hiring and lowers employee hours, so removing the mandate would limit these negative effects of the law.

The government argues that Congress intended to authorize tax credits through exchanges established by the federal government – therefore making tax credits available in all 50 states – despite language in the ACA limiting credits to exchanges “established by the State” and other evidence to the contrary. The ACA, it argues, would be unworkable if two-thirds of the states were not subject to the tax penalty, and there would be dire consequences if individuals in the federal exchange were to lose the federal tax credits that help make insurance affordable.

At oral argument, several justices seemed to be concerned that a ruling that the ACA did not authorize tax credits in states that did not adopt state exchanges would undermine the entire ACA. Justice Elena Kagan, for example, suggested that because of such consequences, the context meant that Congress could not have intended the ACA to work this way.

Justices Antonin Scalia and Samuel Alito indicated they believed that a ruling in favor of the plaintiffs would not necessarily result in the loss of tax credits for individuals in states that did not adopt an exchange if Congress took action to amend the ACA to prevent such a loss. The Supreme Court, they point out, can delay the effect of a ruling in favor of the plaintiffs to allow Congress to act, as it has done prior cases.

Justice Anthony Kennedy seemed to hint that the text of ACA may clearly be read to limit federal subsidies to individuals in states that have adopted their own health-insurance exchanges, but expressed concern that in that case the ACA may unconstitutionally coerce states into adopting such exchanges or face the consequences of not have federal credits and running the risk of insurance rates skyrocketing.

Of course, there is no way to know what the Supreme Court will decide until it issues its decision. Nonetheless, the text of the ACA is clear: The tax credits and penalties are limited to those states that have set up exchanges. The fact that the government does not like the consequences of its actions – and has done nothing to avoid such consequences if it loses this case – is not a reason to ignore the clear meaning of the text of the ACA. As Kagan wrote in a seperate case last year, the Supreme Court has no authority to “disregard clear language simply on the view that … Congress ‘must have intended’ something broader.” Indeed, to the extent that the consequences are problematic, that only highlights the need for legislation to be given more careful consideration and for Congress to be more forthright with the public when it passes legislation.

The problems with the ACA have been long documented. The IRS does not have the authority to rewrite the law simply because of an additional problem created by the ACA. The Supreme Court should uphold the clear meaning of the law and allow the federal government and the states to reevaluate the ACA and adopt patient-centered, market-based reforms.

Image credit: Brett Tatman

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