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02/27/2015

Eric Segall and Jonathan Adler on King v. Burwell
Michael Ramsey

The University of Pennsylvania Law Review Online has this debate between Eric Segall (Georgia State) and Jonathan Adler (Case Western): King v. Burwell and the Validity of Federal Tax Subsidies Under the Affordable Care Act.

On the textual issues, Professor Segall principally argues (footnotes omitted):

The plaintiffs rely on an [Affordable Care Act] section stating that subsidies will be available for certain low-income taxpayers who purchase health insurance from an "Exchange established by the State." They then argue that exchanges created by the federal government are not "established by the State," and therefore the IRS acted illegally by deciding to provide subsidies on federal exchanges. ...

The problem with the plaintiffs’ argument is that it ignores another section of the ACA, which states that, if the states do not create a health exchange as required by the first section, the federal government will establish "such exchange."  The authority given to the U.S. Department of Health and Human Services (HHS) is not to create "an" exchange, a "federal" exchange, or a "United States" exchange but quite specifically "such" exchange.

What does the word "such" connote in the context of the law? Given that the entire structure of the ACA relies on three essential components—one of which is the availability of federal subsidies—it is no surprise that the IRS read the statute to allow for subsidies on both state and federal exchanges. The only legal issue is whether the clear language of the entire law makes that reading impermissible because it is an unreasonable interpretation of the statutory scheme. ...

The word "such" according to Black’s Law Dictionary means something "having just been mentioned." This clear parsing of the relevant statutory language shows that the government should win (in both the hypothetical and the real case).

He adds as a second textual argument:

[A]s health law expert Nicholas Bagley has argued, if the law is read as the plaintiffs ... argue, federal exchanges would not be able to provide insurance to anyone.  The ACA says that only people who "reside[] in the State that established the Exchange" may purchase insurance from the exchanges. If Congress really meant to distinguish between state-established exchanges and federal exchanges, the law would seem to preclude people residing in a state with a federally established exchange from purchasing insurance from that exchange. Congress could not possibly have intended for HHS to create federal exchanges incapable of selling health insurance.

He also has some purpose arguments, plus Chevron, but apparently the foregoing are the central textual arguments as he sees them.  The second of these seems potentially strong (the first one does not move me much).

Professor Adler responds, first emphasizing (as one would expect) the "established by the State" language; he continues:

Section 1321 provides that should a state fail to create the "required exchange"—that is, the exchange required under section 1311—"the Secretary shall . . . establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements." But this language does not establish the proposition that an exchange established by HHS is an exchange "established by the State." Section 1321 expressly refers to HHS as the entity that must "establish" the exchange and provides that HHS does so "within" the state, rather than on the state's behalf. And were there any doubt that HHS is not a "State" under the ACA, section 1304 expressly provides that "'State' means each of the 50 States and the District of Columbia."

On the second point, Professor Adler responds:

Professor Segall claims that, were the Court to accept the plaintiffs' interpretation of the ACA, "federal exchanges would not be able to provide insurance to anyone" because section 1312 provides that "qualified individuals" must be residents of "the State that established the Exchange." Yet the relevant statutory provision, when read in context, creates no such absurd result and is readily harmonized with the rest of the statutory text. Section 1312's definition of a "qualified individual" who may "enroll in any qualified health plan available to such individual" is—like the other requirements of Part II of Subtitle D (sections 1311 through 1313)—addressed to the states on the assumption that they have complied with section 1311's command that each state establish its own exchange. This requirement is conditioned on the state's cooperation. Should a state fail to cooperate, however, the residency requirement has no effect, as there is no state-established exchange to which it may apply.

I'm interested in King v. Burwell mostly on the question whether it is truly a text versus purpose case, or whether, to the contrary, the government has a strong textual argument.  I'm still not sure what to think after these posts.

I also like the case as an example of statutory originalism -- everyone seems focused on the text and the intent of the Congress that enacted it.  Professor Segall, for example, relies (in his conclusion) on "clear text and unassailable context" to show what the ACA "intended."

RELATED: Professor Adler links to video of a King v. Burwell event at the Heritage Foundation here (with Carrie Severino of the Judicial Crisis Network, Simon Lazarus of the Constitutional Accountability Center, and Robert Weiner of Arnold & Porter).

ALSO:  More from Josh Blackman (and Ilya Shapiro) here.

(The King v. Burwell oral argument is Wednesday, 3/4 [date corrected]).