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King v. Burwell: Interpreting the Affordable Care Act

Section 1311 of the Affordable Care Act (PDF) ("Obamacare") provides, in part, as follows:

Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange (referred to in this title as an ‘‘Exchange’’) for the State [. . . .]

Read literally and in isolation, this provision requires states to establish "exchanges." There is no escape clause provided in Section 1311. However, such a provision would violate the rule established in Printz v. United States, in which Justice Scalia, writing for the court, stated that "the forced participation of the States' executive in the actual administration of a federal program" violates the Constitution's federalism provisions.

More on the flip.

Given this, you might be surprised to learn that, given all the legal challenges raised against Obamacare, none was raised challenging Section 1311 under Printz. The reason is that Section 1321 of the ACA provides an alternate mechanism for forming "exchanges" in states that does not require direct state involvement:

PART 3—STATE FLEXIBILITY RELATING TO EXCHANGES SEC. 1321; 42 U.S.C. 18041. STATE FLEXIBILITY IN OPERATION AND ENFORCEMENT OF EXCHANGES AND RELATED REQUIREMENTS. [. . .]

(c) FAILURE TO ESTABLISH EXCHANGE OR IMPLEMENT REQUIREMENTS.—

(1) IN GENERAL.—If— (A) a State [does not establish an Exchange . . . ] the Secretary shall (directly or through agreement with a not for-profit entity) establish and operate such Exchange within the State [. . .]

Thus, as you can see, when Section 1311 is read in the context of the entire statute, and in this instance, when read in concert with Section 1321, there is in fact no "Printz problem" in Section 1311, as the states are not in fact required to "establish an exchange." (Exchanges are the insurance marketplace where participants shop for insurance to meet their particular needs and means, means which include tax credits to subsidize the cost of such insurance.)

What I just demonstrated was an exercise in statutory interpretation, using universally accepted techniques of interpretation. Indeed, my interpretation is so commonplace that even when actors (Republicans) have grasped at many a novel argument to legally attack Obamacare, this has not been one of them. Which brings me to King v. Burwell, a case which, remarkably, will be argued before the U.S. Supreme Court on March 4. In King, the challengers are arguing for a rejection of the commonplace statutory interpretation techniques I've just illustrated, arguing instead for an isolated and illogical reading of 26 USC 36(b), the provision of ACA that describes the tax credits and subsidies to be provided to exchange participants.

King v Burwell is now before the Supreme Court as the challengers petitioned for cert (PDF) of the Fourth Circuit decision finding in favor of the government and ruling that federal exchanges are included in the provision of tax credit and subsidies pursuant to 26 USC 36(b), which provides, in pertinent part:

The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of— (A) 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 [...] and which were enrolled in through an Exchange established by the State under 1311 of [Obamacare]
In their petition for cert, the challengers present the question as follows:
Section 36B of the Internal Revenue Code, which was enacted as part of [Obamacare], authorizes federal tax credit subsidies for health insurance coverage that is purchased through an “Exchange established by the State under section 1311” of the ACA. The question presented is whether the Internal Revenue Service (“IRS”) may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through Exchanges established by the federal government under section 1321 of the ACA. [My emphasis]
Leaving aside the argumentative form of the question presented, this basically does identify the issue, to wit, does Section 36(b) exclude federal "exchanges"? Asserting that it does, the challengers argue:
[E]very canon of construction confirms that “established by the State” cannot be read to include all Exchanges, even those created by HHS. [...] On such a reading, the modifier “established by the State” in § 36B would serve no purpose, violating the “cardinal principle” that “no clause … shall be superfluous, void, or insignificant.” [cite omitted] More to the point, the problem here is not redundancy, but that § 36B specifically answers the precise question at issue[. . .]

While the challengers have other tangential arguments, this is their main thrust —the words say what they say and there is nothing more to it. An "Exchange established by the State under Section 1311" means precisely that and nothing more. There may be a superficial appeal to this argument, but it simply does not conform to the established canons of statutory interpretation. Before I provide you with the precedent that demonstrates the fatal flaw in the challengers' approach to statutory interpretation, let me first show you how the challengers' own petition shows this. In their petition, the challengers discuss the provision for the creation of state exchanges, Section 1311:

Section 1311(b)(1) of the ACA urges states, in the strongest possible terms, to establish Exchanges. It provides: “Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange … for the State.” 42 U.S.C. § 18031(b)(1). [My emphasis]

Let's stop right there. First, Section 1311, read literally and in isolation, does not "urge" states to establish Exchanges. It REQUIRES them to. There is no wiggle room in the isolated language. It is a flat and unambiguous requirement read in isolation. But we know this is not how statutory interpretation works. A statute is read in its entirety, not by snatching phrases in isolation. Thus, the challengers are forced to acknowledge that in fact, understanding Section 1311 requires reading it in concert with Section 1321:

Under the Constitution’s core federalism commands, however, Congress cannot compel sovereign states to create Exchanges. Printz v. United States, 521 U.S. 898, 935 (1997). The Act therefore recognizes that some states may not be “electing State[s],” because they may choose not “to apply the requirements” for an Exchange or otherwise “fai[l] to establish [an] Exchange.” ACA § 1321(b)-(c), codified at 42 U.S.C. § 18041(b)-(c). To address that scenario, the Act authorizes the Department of Health and Human Services (“HHS”) to establish fallback Exchanges in states that do not establish their own. In such cases, the Secretary “shall … establish and operate such Exchange within the State.” ACA § 1321(c), codified at 42 U.S.C. § 18041(c). Thus, if a state declines the role that the ACA urges it to accept, that obligation falls upon the federal government instead.

What have the challengers done here? They have altered the plain and unambiguous meaning of Section 1311, if read in isolation, from a federal command ("Each State SHALL") to instead an "urging." And they are perfectly correct in doing so. This is sound statutory interpretation. But it utterly contradicts the challengers' argument urging that Section 36(b) be read in isolation ("providing the precise answer.")

A proper reading of Section 36(b) requires the use of the same technique of statutory interpretation that the challengers applied to Section 1311. In its Responding Brief (PDF), the government provides an articulate primer of the canons of statutory interpretation and how to apply these canons to Section 36(b):

The relevant question in interpreting the language on which petitioners rely is not whether HHS is a “State.” It is whether the statutory phrase “Exchange established by the State under Section 18031” includes an Exchange that HHS establishes as a surrogate for the State, as authorized by 42 U.S.C. 18041. That question cannot be answered by a myopic focus on that phrase alone: “The plain meaning that [courts] seek to discern is the plain meaning of the whole statute, not of isolated sentences.” Beecham v. United States, 511 U.S. 368, 372 (1994). [... W]hen interpreting statutes like this one, it is especially important to respect the “fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000)[. . . ] There is no such thing as a plain meaning of “an Exchange established by the State under Section 18031” that does not take into account Section 18031 and related provisions.

Precisely so. And we need look no further than the challengers' exposition regarding Section 1311 (aka Section 18031) and its literal requirement that states establish exchanges to see this. To properly understand the plain and unambiguous meaning of that "requirement," we must look to Section 1321 (aka Section 18041). So too, we must read Section36(b)'s invocation of an "Exchange established by the State under section 1311" in conjunction with Section 1321. The government's brief explains:

[T]hree statutory provisions that together set forth how Exchanges will be established and operated—Section 18031 [Section 1311], Section 18041 [Section 1321], and the Act’s definition of “Exchange”—demonstrate that an Exchange established by HHS for a particular State qualifies as “an Exchange established by the State under Section 18031.” The phrase is a statutory term of art.

In simpler terms, if the state "elects" to not comply with its Section 1311 requirement to "establish" an exchange," then under, Section 1321:

the Secretary shall [...] establish and operate such Exchange within the State

That is, the secretary will establish "such Exchange," the 1311 Exchange, within the state. As the government brief explains:

The use of the phrase “such Exchange” conveys that the Exchange to be established by HHS for the State is the “required Exchange” referenced earlier in the same sentence—that is, the Exchange “required” by Section 18031(b)(1), which provides that “each State shall * * * establish an [Exchange].” See Black’s Law Dictionary 1570 (9th ed. 2009) (“such” means “[t]hat or those; having just been mentioned”), Section 18041(c)(1) empowers HHS, acting as the legislatively authorized surrogate of the State, to establish the Exchange that Section 18031(b)(1) requires “[e]ach State” to establish. For purposes of the Act, therefore, an Exchange created for a particular State by HHS is “an Exchange established by the State under Section 18031.”

Just as the proper interpretation of Section 1311 requires reference to Section 1321 to interpret the requirement that states establish exchanges, so to does Section 36(b) require reference to Section 1321 to properly interpret the meaning of a Section 1311 exchange. The challengers recognize the former but their argument demands they inconsistently and illogically deny it for the latter. That is faulty and unsupported statutory interpretation.

The government brief drives homes this point by referring to Obamacare's definition of "exchange":

The applicable statutory definition reinforces that conclusion. “Exchange” is defined to mean “an American Health Benefit Exchange established under section 18031 [Section 1311]."

Thus, when the HHS secretary is empowered by Section 1321 to create such exchange, Obamacare is, in fact, directing the secretary to establish a "1311 Exchange," fully eligible for tax credit subsidies under Section 36(b).

What I have argued here, as you see, is a plain and unambiguous interpretation of Section 36(b) that relies solely on uncontroversial statutory interpretation canons and the relevant text of the law. I have not argued legislative history or absurdity or even typos.

A true and honest "textualist" must admit the soundness of the arguments presented by the government.

The plain and unambiguous meaning of Section 36(b) provides for tax credit subsidies on the federal exchanges.

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  • Display: Sort:
    Thank you for explaining this (none / 0) (#1)
    by CaptHowdy on Mon Mar 02, 2015 at 10:22:40 AM EST
    as one of the millions who have much at stake in this parsing battle, residing in a state without an exchange, your comments offer some comfort.  
    ACA has been a godsend for me and many others I know and many more I don't.  

    Did you see my post on Chevron deference? (none / 0) (#5)
    by Big Tent Democrat on Mon Mar 02, 2015 at 11:13:23 AM EST
    I did (none / 0) (#6)
    by CaptHowdy on Mon Mar 02, 2015 at 11:16:21 AM EST
    if you seen my comments today you know I have been distracted.  

    Parent
    I agree with you conclusion (none / 0) (#2)
    by Reconstructionist on Mon Mar 02, 2015 at 10:45:57 AM EST
     and most of you analysis.

      However, you, probably inadvertently, confuse the issues when you write:

      "What I have argued here, as you see, is a plain and unambiguous interpretation of Section 36(b)...."

      The very first step in the analysis is precisely whether: "Exchange established by the State under section 1311" as used in § 36(b), has a plain and unambiguous meaning. Only if the answer to that question is "no," will the court proceed to apply other rules of statutory construction.

       You have provided an interpretation of § 36 (b) that "that relies solely on uncontroversial statutory interpretation canons and the relevant text of the law[meaning the entire enactment]," but those uncontroversial canons and sound inferences from viewing the various section holistically, do not get applied unless the court first finds ambiguity in the isolated language at issue.  

    That's incorrect (none / 0) (#3)
    by Big Tent Democrat on Mon Mar 02, 2015 at 11:11:55 AM EST
    The intepretation requires (none / 0) (#4)
    by Big Tent Democrat on Mon Mar 02, 2015 at 11:12:49 AM EST
    a holistic look in the first instance.

    There is no proper interpretation that permits viewing a provision in isolation.

    Parent

    I agree with BTD (none / 0) (#10)
    by Peter G on Mon Mar 02, 2015 at 11:47:40 AM EST
    Reviewing and taking into account all pertinent cross-references is not really a "canon of statutory interpretation"; it is more just making sure that the "plain meaning" that you think you see, when you look at one provision alone, actually comports with what amount to statutory definitions of the terms, as used in the statute that you are trying to understand.

    Parent
    Think of it this way (none / 0) (#11)
    by Reconstructionist on Mon Mar 02, 2015 at 12:14:37 PM EST
    First assume every provision of the ACA and the entire federal code was otherwise the same..

     But, § 36B (b)(2)(A) had a final clause which read:

    Notwithstanding any other provision of law no taxpayer purchasing a policy through an exchange established and operated by DHHR pursuant to
    42 U.S.C. 18041(c)(1), shall be eligible for any amount of premium assistance or any tax credit.

      Were everything else absolutely the same, including obviously, the rules of statutory construction, what would be the result?

      It's precisely because the actual language  is ambiguous that the myriad ways in which the NEGATIVE inference petitioners seek to have the court draw from the actual language is relevant.

       

    Parent

    That should read (none / 0) (#12)
    by Reconstructionist on Mon Mar 02, 2015 at 12:21:06 PM EST
     myriad ways in which the NEGATIVE inference petitioners seek to have the court draw from the actual language conflicts with other provisions  is relevant

    Parent
    Well (none / 0) (#13)
    by Big Tent Democrat on Mon Mar 02, 2015 at 12:43:59 PM EST
    That's just well, wrong.

    Parent
    How? (none / 0) (#15)
    by Reconstructionist on Mon Mar 02, 2015 at 12:59:52 PM EST
      What is your argument for the  position that if Congress had included such language, the plain meaning would not prohibit  IRS regs permitting taxpayers purchasing through DHHR operated exchanges to receive subsidies? Why wouldn't petitioners would prevail based on the plain and unambiguous meaning of those isolated words regardless of any other language in any other section?

     (Not implying that language would not raise EP issues -- although likely rational basis analysis would apply-- or other issues)

    Parent

    Here's your problem (none / 0) (#17)
    by Big Tent Democrat on Mon Mar 02, 2015 at 02:08:26 PM EST
    "on the plain and unambiguous meaning of those isolated words regardless of any other language in any other section?"

    That's simply not an accepted approach to statutory construction.

    That's the whole point.

    Parent

    No, I'm not. (none / 0) (#7)
    by Reconstructionist on Mon Mar 02, 2015 at 11:21:44 AM EST
    See:
     Desert Palace, Inc. v. Costa, 539 U.S. 90, 99 (2003).

    Our precedents make clear that the starting point for our analysis is the statutory text. See Connecticut Nat. Bank v. Germain, 503 U. S. 249, 253-254 (1992). And where, as here, the words of the statute are unambiguous, the "`judicial inquiry is complete.'" Id.,

    ad infinitum
    -------------
    Any question of statutory interpretation begins with looking at the plain language of the statute to discover its original intent. To discover a statute's original intent, courts first look to the words of the statute and apply their usual and ordinary meanings.

    If after looking at the language of the statute the meaning of the statute remains unclear, courts attempt to ascertain the intent of the legislature by looking at legislative history and other sources. Courts generally steer clear of any interpretation that would create an absurd result which the Legislature did not intend.

    Other rules of statutory interpretation include, but are not limited to:
    *Statutes should be internally consistent. A particular section of the statute should not be inconsistent with the rest of the statute.
    *When the legislature enumerates an exception to a rule, one can infer that there are no other exceptions.
    *When the legislature includes limiting language in an earlier version of a statute, but deletes it prior to enactment of the statute, it can be presumed that the limitation was not intended by the legislature.
    *The legislature is presumed to act intentionally and purposely when it includes language in one section but omits it in another.
    *Where legislation and case law conflict, courts generally presume that legislation takes precedence over case law.
    *The Rule of Lenity: in construing an ambiguous criminal statute, a court should resolve the ambiguity in favor of the defendant.
    *A court may also look at: the common usage of a word, case law, dictionaries, parallel reasoning, punctuation

    Statutes are sometimes ambiguous enough to support more than one interpretation. In these cases, courts are free to interpret statutes themselves. Once a court interprets the statute, other courts usually will not go through the exercise again, but rather will enforce the statute as interpreted by the other court.


    Yeah you are (none / 0) (#8)
    by Big Tent Democrat on Mon Mar 02, 2015 at 11:23:47 AM EST
    You are trying to interpret phrases in isolation. In fact, Justice Scalia has a few words for you:

    [N]o interpretive fault is more common than the failure to follow the whole-text canon, which calls on the judicial interpreter to consider the entire text, in view of its structure and of the physical and logical relation of its many parts.


    Parent
    Yes... (none / 0) (#9)
    by Reconstructionist on Mon Mar 02, 2015 at 11:46:42 AM EST
      you do not get to that stage of the analysis if the court finds the plain meaning of the words are unambiguous. It is the very fact that applying a "dictionary definition" to isolated words would be  inconsistent with, prevent the operation of  other provisions, etc. or lead to absurd results. It's the very fact that the words at issue would defeat the intended purpose" if interpreted literally that cause courts to reject the argument that they have a plain meaning based on the common understanding of those words.  

    Again (none / 0) (#14)
    by Big Tent Democrat on Mon Mar 02, 2015 at 12:46:01 PM EST
    You're wrong.

    The one thi9ng that is NOT controversial her is that to discern the "plain meaning" of ANY provisions of a statute requires a HOLISTIC view, not an isolationist view.

    You're just wrong right off the bat.

    You can't discern the "plain meaning" of Section 36(b) by just looking at Section 36(b).

    Due respect, this is elementary statutory interpretation.

    Parent

    The clear-headed and (none / 0) (#16)
    by KeysDan on Mon Mar 02, 2015 at 01:35:59 PM EST
    persuasive arguments presented by BTD, which embrace the soundness of the textualist arguments of the government, cause worry that there is less to this case than meets the legal eye.

    Calling upon Scalia's lesson in statutory interpretation to follow the whole-text canon so as to consider the entire text along with the interlocking relationships among structure and composite parts, only adds to the worry.  

    That King v Burwell was taken on cert. reveals that at least four Justices felt it was worthy of Supreme Court review.   Scalia is likely to have been one such Justice. And, while voting to take the case does not necessarily indicate how that justice will decide, in this instance, it suggests to me a strong likelihood.  

    Consideration of this case by the Supreme Court is somewhat of a mystery. There were no splits among Circuits that needed to be resolved. It is hoped that what could not be done through Constitutional review, may be seen as being accomplished by by statutory interpretation.   Unless, of course, the Court just wants to clarify and strengthen the law.  It certainly would be judicial corruption to use this case for political "balance" in the term's case decisions.

    Question: what was the incentive for (none / 0) (#18)
    by Anne on Mon Mar 02, 2015 at 02:08:52 PM EST
    states to create their own exchanges?  I thought the tax credit subsidies had something to do with that, but maybe I'm conflating that with the Medicaid subsidies.

    If you're saying that the subsidies were always going to be there no matter what, why would any state have established its own exchange?

    Was it the intention of the non-exchange states to have subsidies denied to those who enrolled for coverage through the Federal exchange - or was the thinking that non-participation wasn't going to hurt anyone because the subsidies would still be available?  Or, more likely, that they hoped the disincentive would discourage enrollment in the federal exchange and thus make the ACA model - and Obama - look like a failure?

    Possible I'm not looking at this (or remembering the details) correctly - it's just something that popped into my head as I was reading your post, Armando.

    The federal government provided funding (none / 0) (#19)
    by Big Tent Democrat on Mon Mar 02, 2015 at 02:10:58 PM EST
    for state exchanges and the opportunity to manage them themselves.

     

    Parent

    Honestly, Anne, I think it was a (none / 0) (#20)
    by caseyOR on Mon Mar 02, 2015 at 02:19:40 PM EST
    sop thrown in to appease the state-government-good-federal-government-bad crowd.

    As all of us who read Charlie Pierce know the real work of governmitin' gets done at the state level.

    Parent