March 4, 2015

Supreme Court Hears King v. Burwell


  • The Supreme Court heard arguments today on the legality of the Obama administration’s IRS regulation extending health insurance subsidies to people in states that use the federal insurance exchanges.

  • At issue is whether the words of the law, “through an Exchange established by the State,” refer only to state-created exchanges.

  • The case appears to hinge on whether the justices should apply the law as written or consider the broader effect of how the law would function in states without subsidies available.


Today, the Supreme Court heard arguments in King v. Burwell, a challenge to an IRS regulation that extends health insurance subsidies to people in states with a federal exchange. The oral arguments lasted nearly 90 minutes.

Challengers, represented by Michael Carvin, argued that the question in the case revolves around interpreting a statue as written by Congress. They argue that the federal government cannot create an “Exchange established by the state.” If the plain language of the statute is interpreted as it was written, then the IRS rule extending these subsidies to states using the federal exchange will likely be deemed invalid. Justices primarily questioned Carvin on whether Congress intended to prevent subsidies in states using the federal exchange, and on potentially negative consequences of that interpretation.

The administration, represented by Solicitor General Donald Verrilli, argued that the IRS interpretation of the statute was consistent with what Congress intended when it drafted the law. He said that the entity establishing the exchange was immaterial to whether subsidies would be allowed in the exchange and that challengers’ interpretation would render the law “an incoherent statute that doesn’t work.”

What Did Congress Write?

In an exchange with Verrilli, Justice Scalia said that the question is not what Congress intended but what Congress wrote. Scalia called the reasoning that the federal government can establish a state exchange “gobbledygook.” 

Putting States in a Difficult Position

Justice Sotomayor noted that without subsidies, the insurance markets in those states would likely collapse. She asked challengers how the IRS’ subsidy scheme would not be coercive such that it would violate  constitutional principles of federalism. As a legal matter, Carvin responded that many government programs make federal funding contingent on state participation, saying “it’s the kind of routine funding condition that this court has upheld countless times.” As a factual matter, Carvin noted that the parade of horribles being advanced by the administration was not something contemplated by Congress when the law was written.


Justice Sotomayor: “But nobody ­­ no one’s going to visit the program if there are no subsidies because not enough people will buy the programs to stay in the exchanges.”

Mr. Carvin: “That is demonstrably untrue and not reflected anywhere in the legislative history. The legislative history quite clearly contradicts that. Many Senators got up and said there are very valuable benefits to the exchange … There’s not a scintilla of legislative history suggesting that without subsidies, there will be a death spiral. Not a word.”


Congress Would Prevent “Death Spiral”

As this case has made its way to the high court, some have argued that if the subsidies are struck down, then an insurance market “death spiral” would result – with healthy people dropping their coverage en masse. Barring any subsequent changes to Obamacare, this would be likely, because of the law’s perverse interplay of mandates, regulations, and price controls. However, Scalia suggested such a death spiral would not happen because, as often is the case after the court rules, Congress intervenes.


Justice Scalia: “You really think Congress is going to sit there … Congress adjusts, enacts a statute that takes care of the problem. It happens all the time. Why is that not going to happen here?”

Mr. Verrilli: “Well, this Congress, your honor …” (Laughter)

Justice Scalia: “I don’t care what Congress you’re talking about. If the consequences are as disastrous as you say, so many million people without insurance and whatnot, yes, I think this Congress would act.”


Justice Alito noted that the court could prevent the harms forecasted by the administration simply staying the mandate for the remainder of the year – a term sufficient for a remedy to become available.


“But here, it’s not too late for a state to establish an exchange if we were to adopt petitioners’ interpretation of the statute. So going forward, there would be no harm.”

– Justice Alito


Skepticism of Deferring to the IRS

Justice Kennedy said that it seems a “drastic step” for the court to determine whether the IRS could “make this call one way or the other.” He later added, “it seems to me a little odd that the director of internal revenue didn’t identify this problem if it’s ambiguous and advise Congress it was.”

The Consequence of Poorly Conceived and Drafted Law

The clearest manifestation of Congressional intent is what Congress has written. If Congress had meant what the administration says it did, then Congress would have written that subsidies would be available for anyone obtaining healthcare from an exchange established in a state, rather than by a state. But that is not what Congress did. The Obama IRS should not be permitted to rewrite the plain language of the statute in order to make a poorly conceived and poorly drafted law workable.

As Justice Scalia observed, even “if the only reasonable interpretation of a particular provision produces consequences” it’s not for the court to “twist words as necessary” to make sense of the law. “That can't be the rule.”

In another recent case, even Justice Kagan seemed to agree with that point. “This court does not get to rewrite the law,” she wrote, “but we are not entitled to replace the statute Congress enacted with an alternative of our own design.” The challengers before the court today, no doubt, hope she sees the wisdom in her own words.  

Issue Tags: Judiciary, Health Care