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In upholding ACA subsidies, Supreme Court majority decided that context matters

The Supreme Court today preserved the Affordable Care Act by a 6-3 ruling written by Chief Justice John Roberts.

Supporters of the Affordable Care Act celebrating outside the Supreme Court Building after the court upheld the law in a 6-3 vote on Thursday.
REUTERS/Joshua Roberts

The Supreme Court today preserved the Affordable Care Act by a 6-3 ruling written by Chief Justice John Roberts. The three dissenters were Justices Antonin Scalia (who wrote the dissent) and Justices Clarence Thomas and Samuel Alito.

The full decision and dissent are available here.

The case turned on the question of whether the federal tax credits, which are necessary to enable millions of Americans to afford health insurance, are limited to those buying health insurance from states that have set up their own online health care marketplaces (called “exchanges”) or whether the language that implies such limits was merely sloppy drafting.

Thirty-six states have declined to set up their own exchanges. If the plaintiffs had won this case, the federal subsidies would have been unavailable in those states, and the mandate requiring everyone to get insured or pay a fine would have been essentially removed. It is hard to believe that this was what Congress intended, but the Act says in several places that the subsidies are available to a person who buys insurance through “an exchange established by the State.”

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Writing for the majority, Chief Justice Roberts wrote that:

When read in context, the phrase “an Exchange established by the State” is properly viewed as ambiguous. … The Affordable Care Act … contains more than a few examples of inartful drafting …

[A] 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.”

Given that the text is ambiguous, the Court must look to the broader structure of the Act to determine whether one of Section 36B’s “permissible meanings” produces a substantive effect that is compatible with the rest of the law.

The combination of no tax credits [the subsidies to help millions of people afford insurance are in the form of tax credits] and an ineffective coverage requirement [this is a reference to the likelihood that the mandate requiring people to get insurance would also disappear if the plaintiffs prevailed] could well push a State’s individual insurance market into a death spiral. [“Death spiral” refers to how an insurance market becomes so imbalanced that it collapses.] It is implausible that Congress meant the Act to operate in this manner …

Petitioners’ plain-meaning arguments are strong, but the Act’s context and structure compel the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.

Writing for the minority, Justice Scalia went sarcastic. Thus:

The Court holds that when the Patient Protection and Affordable Care Act says “Exchange established by the State” it means “Exchange established by the State or the Federal Government.” That is of course quite absurd, and the Court’s 21 pages of explanation make it no less so…

This case requires us to decide whether someone who buys insurance on an Exchange established by the Secretary [meaning the secretary of Health and Human Services, meaning exchanges created by the feds in states that declined to establish their own] gets tax credits.

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You would think the answer would be obvious — so obvious there would hardly be a need for the Supreme Court to hear a case about it.

Words no longer have meaning if an Exchange that is not established by a State is “established by the State.” It is hard to come up with a clearer way to limit tax credits to state Exchanges than to use the words “established by the State.” And it is hard to come up with a reason to include the words “by the State” other than the purpose of limiting credits to state Exchanges.

 “[T]he plain, obvious, and rational meaning of a statute is always to be preferred to any curious, narrow, hidden sense that nothing but the exigency of a hard case and the ingenuity and study of an acute and powerful intellect would discover.” [This is a quote from a 1925 Supreme Court ruling in Lynch v. Alworth-Stephens Co.]

Under all the usual rules of interpretation, in short, the Government should lose this case. But normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved.