King v. Burwell: “What is a State Exchange?”

by David Greenberg: The Supreme Court agreed to review the Fourth Circuit Court of Appeal decisions for King v. Burwell, 759 F.3d 358 (4th Cir. 2014). The Federal District Court for the Eastern District of Virgina ruled that the language in the Patient Protection and Affordable Care Act (ACA) unambiguously permitted the IRS to grant tax credits to individuals who purchased health insurance in federal exchanges (997 F.Supp.2d 415, 428). The Fourth Circuit disagreed with this interpretation, but determined that the IRS reasonably rooted their regulation in the Congressional intent of ACA.

Interpreting the ACA
All lawyers or law students should know that all statutory interpretation begins with the text of the statute. These same people should also know that the text of the statute rarely provides an adequate solution. The text of the ACA is over 900 pages long, so there are bound to be slight inconsistencies in language. Proofing such a large, complex document is next to impossible. Judges (more realistically, both parties’ lawyers) must piece together the meaning of those words so one provision does not cancel out another provision, or make a different provision meaningless. Simultaneously, the judge must attempt to honor the intent of the Congress insofar as Congress did not go beyond their authority. This is no easy task.

The ACA has a second important dynamic. It basically created, altered, or expanded tons of Federal agencies. This case, like every other ObamaCare case you have read about, is at the core a question of an agency’s action. There are two Supreme Court cases that determine how all courts must judge these actions: Chevron and Skidmore. In this case, Chevron governs.

Chevron set up a two-step process to determine if an agency’s regulation was legitimate. First, the Court must determine if Congress had a specific intent in enacting the language of a statute. If Congress’s intent is clear, then agencies must honor that intent. If the intent is ambiguous, then the court may proceed to the second step. The court must look at the regulation to determine if it reasonably accomplished Congress’s intent in establishing the law. In most cases, the court determines the agency acted reasonably.

So, at the heart of this case is two questions: Did Congress provide unambiguous intent in crafting these provisions in the ACA? If so, did the IRS violate its intent? If not, then did the regulation violate the intent of the ACA generally?

The Supreme Court’s Interpretation Dynamic
The Supreme Court honors its past decisions describing form, but individual justices often disagree at how these test should be applied. Like questions of Constitutional interpretation, the Supreme Court is divided sharply on statutory interpretation. Generally speaking, the Court can be divided into three general classes: purposivist, intentionalists, and textualists. These three general concepts differ in two questions: the amount of textual ambiguity required to look to secondary sources and which secondary sources are relevant.

Textualists generally require the highest amount of ambiguity or absolute absurdity to overcome the plain meaning of a statute. Even in these cases, textualists prefer to look within the Act for clarity before turning to secondary sources. In the event secondary sources are needed, they tend to look to general or technical dictionaries from the era of passage before legislative history. The Court has three textualists: Justices Scalia, Thomas, and Alito.

Intentionalists have a slightly lower threshold of ambiguity. If that threshold is met, the question changes slightly. They attempt to determine Congress’s intent to give the language additional meaning. THe theory is laws are passed to solve a social problem. If the Court can determine the Congress’s intended solution, then they can honor that intention. Intentionalists are willing to look at legislative history to determine intent when the statute is silent. The Court has two intentionalists: Chief Justice Roberts and Justice Kennedy.

Purposevists have an even lower threshold of ambiguity. The standard is so low that if a statute is before the Supreme Court, it will meet the threshold. Like intentionalists, the question changes slightly after the threshold is met. Purposevists want to know the purpose, or ultimate goal, of the statute. The interpretation that best reaches that end is the best possible interpretation. The Court has four purposivists: Justices Ginsburg, Breyer, Sotomayor, and Kagan.

Applying Chevron to King
Applying Chevron to King v. Burwell requires the Court to first look at the statutory language. The specific section is in 26 U.S.C. 36B (b)(2). It reads as follows:The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of— the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act, or the excess (if any) of— the adjusted monthly premium for such month for the applicable second lowest cost silver plan with respect to the taxpayer, over an amount equal to 1/12 of the product of the applicable percentage and the taxpayer’s household income for the taxable year.Making things a little bit less ambiguous, Section 1311 of the Patient Protection Act (42 U.S.C § 18031) only describes state run exchanges, while section 1321 (42 U.S.C. § 18041) describes federally run exchanges. Likewise, Congress understands the difference between State and Federal programs, and it would be a hard thing to believe that Congress meant “Federal and State” when it used the word “State” in this context. Textualist interpretation likely will end on this distinction. The statue is unambiguous, limiting the authority of the IRS to provide this tax credit when health insurance is purchased in state operated exchanges.

None of the Court of Appeals decisions have come to this final conclusion (Halbig is being review en banc in the D.C. Circuit). As such, it is never this simple. Section 1321 provides,If—a State is not an electing State under subsection (b); or the Secretary determines, on or before January 1, 2013, that an electing State—will not have any required Exchange operational by January 1, 2014; or has not taken the actions the Secretary determines necessary to implement—the other requirements set forth in the standards under subsection (a); or the requirements set forth in subtitles A and C and the amendments made by such subtitles; the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.Courts have interpreted this provision to mean that Federal exchanges that are set up under these circumstances are functionally the same exchanges set up under section 1311. For most of the Supreme Court, this fact may be enough to view the language is ambiguous. Because legislative history is essentially non-existent, courts have been unable to determine which is these interpretations Congress intended.

Because of this, courts have entered the second stage of Chevron. This opens the door to further information. Court’s first attempt to determine the ill targeted by the ACA. Chief Justice Roberts provided the answer in National Federation of Independent Business v. Sebelius, “The Act aims to increase the number of Americans covered by health insurance and decrease the cost of health care.” If this is the ill, does the IRS expansive interpretation reasonably further this goal? That is plainly yes.

The big question for commentators and Fantasy Supreme Court players is how the Court’s intentionalists will handle the lack of legislative history. Chief Justice Roberts and Justice Kennedy understanding of the Act’s constitutionality differ greatly, but the constitutionality of an Act and the interpretation of that Act are completely different questions.
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David Greenberg is a Juris Doctor candidate at Mercer University in Macon, Georgia. He has worked for several conservative think-tanks and grassroots organizations researching government studies, energy policy, and constitutional law. He shared this article on The College Conservative.

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