The United States Supreme Court has issued its long-awaited decision in King v. Burwell, No. 14-114 (June 25, 2015). By a 6-3 vote, the Court upheld IRS regulations providing that tax credits for the purchase of insurance through “an Exchange established by the State [under 42 U.S.C. §18031]” are available “regardless of whether the Exchange is established and operated by a State .. or by [the federal government].” By interpreting the ACA in this way, the Court avoided a result that it said “could well push a State’s individual insurance market into a death spiral”.
The petitioners in King were four residents of Virginia, which is one of 34 states that have exchanges established by the U.S. Department of Health and Human Services, rather than by the state itself. The petitioners did not want to have to buy health insurance. Since they claimed that Virginia’s Marketplace Exchange did not qualify as “an Exchange established by the State”, they should not be eligible to receive tax credits. If they did not receive tax credits, they asserted, that would push their cost of health insurance to a level in excess of eight percent of income and thus would exempt them from the health insurance coverage requirement of the ACA. 26 U.S.C. §5000A(e)(1).
The U.S. Court of Appeals for the Fourth Circuit, the court below, had rejected the petitioners’ claim, holding that a literal reading of Section 1311 of the ACA, in isolation, was inconsistent with the overall purpose and design of the statute. But in another case, decided the same day, a panel of the U.S. Court of Appeals for the D.C. Circuit decided, by a 2-1 vote, that Section 1311, on its face, limited tax credits to State Exchanges and precluded the extension of tax credits to insurance purchased through exchanges established by the federal government. Thus, the issue came before the Supreme Court as a result of a split among the circuit courts.
Writing for the Court, Chief Justice Roberts, while conceding that the petitioners’ plain meaning arguments were “strong”, said of those arguments: “It is implausible that Congress meant the Act to operate in this manner…. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation. But those requirements only work when combined with the coverage requirement and the tax credits. So it stands to reason that Congress meant for those provisions to apply in every State as well.”
Justice Scalia, in a dissent joined by Justices Thomas and Alito, said that “[w]ords no longer have meaning if an Exchange that is not established by a State is “established by the State”. “Today’s interpretation,” he said, is not merely unnatural; it is unheard of. Who would ever have dreamt that ‘Exchange established by the State’ means ‘Exchange established by the State or the Federal Government’?”
The Supreme Court’s opinion spares the states and Congress the task of having to try to implement hastily devised contingency plans to save Obamacare. But it also establishes that there may be circumstances when the plain meaning of a particular part of a statute may be overridden by interpreting that part so as to be consistent with the overall objectives of the statute. Those circumstances, as the Court’s opinion in King suggests, include a consideration of the negative consequences arising from a plain meaning interpretation of a statutory provision.