On Wednesday the Supreme Court heard oral arguments in King v. Burwell, arguably the most important case of this term. The challengers in King claim that the Affordable Care Act only allows for health insurance exchanges set up by the states. Thirty-four states have declined to set up their own exchanges, instead allowing the federal government to create exchanges for them. The King challengers claim that federal subsidies should be unavailable to Americans in the 34 states without their own exchanges. If the court agrees, these federal subsidies will be canceled, crashing the federal exchange and causing an estimated 8.2 million Americans to lose their health insurance.*
My colleague Dahlia Lithwick sat in on arguments and will be reporting in-depth later today. Before she weighs in, I’ll provide a few immediate reactions to the justices’ questioning. This post will be updated.
1. The liberals forcefully support the government’s position.
Throughout this litigation, the government has argued that, read holistically, the ACA obviously allows for the creation of federal exchanges and subsidies. In a bout of vigorous questioning, the court’s four liberals clearly shared this reading of the law. Justice Stephen Breyer noted that the challenger’s strained reading of the statute would create “anomalies” that would render the law illogical as a whole. Justice Elena Kagan insisted that the government’s reading of the relevant portions of the law reflected a credible interpretation of what Congress intended to do. Justice Sonia Sotomayor asked why the challengers’ interpretation of the law—which would require dozens of states to set up their own exchanges or let their citizens lose insurance coverage—wasn’t “coercive in an unconstitutional way.”
Kagan emerged as the fiercest interrogator of Michael Carvin, the attorney seeking to invalidate the federal exchanges. In particular, Kagan pressed Carvin on his claim that four words—"established by the State"—should be read out of context in discordance with the rest of the law, asking him:
[W]e are interpreting a statute generally to make it make sense as a whole, right? We look at the whole text. We don't look at four words. We look at the whole text, the particular context, the more general context, try to make everything harmonious with everything else.
2. Kennedy seemed to swing in favor of the law, though not conclusively.
Most of the litigation surrounding King has revolved around whether the IRS was within its rights to authorize the creation of federally facilitated exchanges and provide subsidies through them. Recently, however, the ACA’s supporters have settled on a new argument, best explained in an amicus brief filed by Virginia’s attorney general. According to this "federalism" argument, even if the ACA plausibly called for states to set up their own exchanges, requiring them to do so would amount to unconstitutional coercion. Put differently, Congress cannot constitutionally dragoon states into setting up their own exchanges, as that would violate congressional power and encroach upon state sovereignty. Thus, the court should assume that Congress did not intend to violate the Constitution, and intentionally gave states the option to rely on federally facilitated exchanges.
Justice Anthony Kennedy—who emerged as the likely swing vote in the case—seemed fixated on this argument, raising it repeatedly throughout the morning. If the Supreme Court struck down the federal exchanges and subsidies, Kennedy mused, that would put extreme pressure on the states to set up their own, raising a “serious constitutional problem.” In order to avoid such a problem, Kennedy seemed to suggest, the court should side with the government and permit the federally facilitated exchanges to continue. Alternatively, Kennedy implied that even if Congress did intend to force states to set up their own exchanges, the court should strike down that provision to protect the federally facilitated exchanges. Finally, Kennedy mused that Congress could not have intended to coerce state legislators to set up their own exchanges, knowing such coercion would be unconstitutional.
If Kennedy buys any of these arguments, the ACA will emerge from King unscathed. If he doesn’t, the King challengers seem poised to succeed. Justices Antonin Scalia and Samuel Alito obviously favored the challengers’ position throughout the morning, and Chief Justice John Roberts, though surprisingly quiet, asked few tough questions of the law’s opponents. Justice Clarence Thomas, silent as usual, is a nearly certain vote against the government.
There is good reason to think Kennedy will favor this federalism argument and uphold the federal exchanges and subsidies. The justice was clearly attuned to the real-world consequences of a ruling against the government. Such a decision would wreck the insurance markets of states that refuse to set up their own exchanges, sending them into a so-called death spiral as healthy customers drop out and premiums skyrocket. Once caught in such a spiral, these states may be effectively forced to create their own exchanges, even if their legislatures despise ObamaCare. The fact that Kennedy recognizes this inevitable result of a ruling against the government suggests he is extremely hesitant to quash the federal exchanges and leave 34 states trapped in a health insurance death spiral.
3. The court wants to rule on the merits.
In recent weeks several investigative reporters discovered that all four plaintiffs in King may not have standing—or legal authority—to challenge the ACA. None of them, it seems, will actually be penalized if they do not buy health insurance, meaning they won’t suffer any harm under the law and have no right to challenge it. Justice Ruth Bader Ginsburg pointedly raised the standing issue, but the conservative justices quickly swatted it down, and Sotomayor also appeared eager to rule on the merits of the case. It seems quite likely, then, that the court will ignore standing issues and hand down an opinion one way or the other by late June.
4. Kennedy doesn’t like the government’s primary argument.
As I explained earlier, Kennedy’s early questioning revealed his federalism concerns with the challengers’ arguments, suggesting that the federally facilitated exchanges actually protect states’ rights. Later in the morning, though, Kennedy make clear that, if he ultimately rejected the federalism argument, he would probably reject the validity of the federal exchanges, too.
Kennedy, it seems, has a problem with the government’s primary argument. The Obama administration has insisted that, if the ACA is ambiguous, the court should simply defer to the IRS’s interpretation of it. (And the IRS, of course, has found that the federal exchanges are valid.) But Kennedy pushed back against such deference
[I]t seems to me a drastic step for us to say that the [IRS] and its director can make this call one way or the other when there are, what, billions of dollars of subisides involved here? Hundreds of millions? ... It seems to me our cases say that if the [IRS] is going to allow deductions [this large, the law] has to be very, very clear.
5. Roberts didn’t show his hand.
As everybody knows, the chief justice was the swing vote in the 2012 Obamacare case, siding with the liberals to uphold the law’s individual mandate. When the arguments began, all eyes were on the chief—but Roberts kept mum throughout almost the entire morning. At one point, he indicated that he was eager to sweep aside standing issues and reach the merits of the case. But his only difficult question arose near the end of the arguments, when Solicitor General Don Verrilli encouraged the court to defer to the IRS’s interpretation of the law.
“That would indicate that a subsequent administration could change that interpretation?” Roberts asked skeptically. Verrilli explained that a future shift in IRS policy was highly unlikely. Roberts asked no follow-up questions and remained silent for the rest of the morning.
Because Roberts provided so few tea leaves during arguments, it’s exceedingly difficult to predict his vote. Should Kennedy side with the liberals to uphold the federal exchanges, Roberts may join him in order to avoid a seemingly partisan 5–4 split. Should Kennedy vote against the government, Roberts will be forced into a familiar position, with the ACA’s future riding on his vote. Tom Goldstein—Supreme Court oral advocate, founder of SCOTUSblog, and veteran prognosticator—predicted in July that Roberts and the liberals would once again vote to save the ACA. Goldstein was one of the few court watchers who correctly predicted the outcome of the 2012 case. His forecast here, then, deserves attention.
*Correction, March 4, 2015: This post originally misstated that the challengers in King claim that the ACA allows for only state exchanges. They do not directly claim that; they claim that federal subsidies are available only through state exchanges.