Tuesday, March 03, 2015

Text All The Way Down: Why the Government Should Prevail in King v. Burwell

By Eric Segall

I had the pleasure of debating Professor Jonathan Adler of Case Western Reserve at the University of Pennsylvania on Monday afternoon on the issue of King v. Burwell and the legality of federal subsidies on federal exchanges (because of weather he had to appear via Skype). As usual Jonathan was civil and classy and I thoroughly enjoyed the back and forth. The debate was sponsored by the American Constitution Society and the Federalist Society as well as the law review. Our dueling essays can be found here.

There has been so much written about the case, by so many talented people, that I just want to add emphasis to one point that has not received nearly enough attention. Many scholars who believe the government should win the case have repeatedly emphasized that Professor Adler and the plaintiffs are focusing too much on the phrase “established by the state” in Section 1311 of the Act and not enough on the rest of the law and its myriad provisions making clear that the iconic “three-legged stool” was supposed to be the hallmark of the insurance exchanges regardless of whether the websites were run by the state or federal governments. I agree with all that but the case, properly analyzed, is actually much simpler and resort to overall context is unnecessary.

Professor Adler and the plaintiffs have somehow convinced lower courts and even many academics that there is a provision in the ACA that says federal subsidies are only available on state exchanges and it is up to the government to prove otherwise by reference to other provisions in the statute or the context of the law. But, there is no such provision and, ironically, there is part of the law that says exactly the opposite—that subsidies are in fact available on federal exchanges. Properly analyzed, the case should start and end there, unless it creates absurd results to allow such subsidies on federal exchanges (which no one is arguing).

Section 1321 of the ACA requires the Secretary of HHS to create health exchanges in states which refuse to create their own exchanges. This is not debated by anyone. Thus, the inquiry must start with Section 1321. Throughout my debate with Professor Adler, and for that matter, in social media, in law reviews, and in blogs, Professor Adler has tried to focus attention on Section 1311 as the place to start. But, looking at the law in the proper order shows why the government should win.

What kind of exchange does HHS have to create under Section 1321? The answer, found in the same section, is an exchange “such” as the one mentioned in 1311. Are federal subsidies available on Section 1311 exchanges? Yes. Does HHS have to create that kind of exchange? Yes. Case over.

Professor Adler’s response to this argument during our debate was that a 1321 exchange is established by the federal government not a state and subsidies are only available on exchanges “established by a state.” But the law does not say that. It does say “qualified” consumers may obtain federal subsidies on an “exchange established by the state” but nowhere does it say subsidies are only available on such exchanges. 

What the law does say, however, with startling clarity, is that, if a state chooses not to create an exchange (where subsidies would be available), HHS must create that (or such) exchange. It is only by looking at Section 1311 first, which is inappropriate, that anyone could reasonably think subsidies aren’t available on the exchanges created by HHS.

If we do turn to context, Professor Adler’s and the plaintiffs’ theory of the case requires the belief that Congress required the federal government to set up health insurance exchanges that have nothing to do with the entire point of the ACA (to make health insurance more, not less, affordable). Normally thoughtful people like my former professor James Blumstein of Vanderbilt, have written entire pieces ignoring this anomaly on the basis that the law explicitly says subsidies are either 1) only available on state exchanges or 2) are prohibited on federal exchanges. But the law says neither and thus Blumstein’s essay, like so many others written about the case, is based on an entirely false premise.  

If applying the law as written is truly important to the Justices, the Court will find that Section 1321 of the ACA explicitly requires the Secretary of HHS to create a federal health insurance exchange just like the one mentioned in Section 1311 (where federal subsidies are required for qualified consumers). Any other interpretation of Section 1321 changes the plain meaning of the ACA beyond recognition.