No More 'Existential' Court Threats to ACA, Experts Say

June 29, 2015

Robert Schapiro and Ilya Shapiro are two constitutional law experts with similar last names and dissimilar views on interpreting the nation's legal blue print.

The two men agree, however, that in the wake of the Supreme Court decision to uphold premium subsidies under the Affordable Care Act (ACA) in all states, and not just some, the controversial law no longer runs the risk of judicial death.

"I think we're done with 'existential' legal threats," said Shapiro, a senior fellow in constitutional studies at the Cato Institute and a critic of the court's ruling. "We'll see lots of other cases, both big and small, but they probably won't aim at the heart of Obamacare's constitutionality or operation."

Schapiro with a "c," the dean of the Emory University School of Law in Atlanta, Georgia, called the subsidy case and the individual mandate case in 2012 the strongest challenges to the ACA. "I think we'll see some [additional] litigation on the margins, but they will not have any widespread impact."

Furthermore, any ACA case that makes it to the high court will not enjoy any kind of home court advantage, Schapiro suggested.

"The [subsidy case] does suggest that the court is not going to go out of its way to strike down the ACA," Schapiro told Medscape Medical News.

The subsidy case was widely viewed as an existential threat to the ACA. The outcome could have erased premium subsidies for 6.4 million people in 34 states that had not established their own health insurance marketplaces or exchanges, but instead defaulted to a federally established one. The plaintiffs in the case said these people were ineligible for assistance because section 36B of the law authorizes subsidies for individuals purchasing coverage through an exchange "established by the state." The plaintiffs wanted that phrase interpreted literally.

Chief Justice John Roberts Jr, who wrote the court's opinion, is credited with saving the ACA from the strict-constructionist axes wielded by Associate Justice Antonin Scalia and other conservative justices. It is a role Roberts also played in the court's 2012 decision to uphold the law's requirement for individuals to purchase healthcare coverage. Then, as now, Scalia ended up on the losing side.

In a dissenting opinion joined by Associate Justices Samuel Alito Jr and Clarence Thomas, Scalia said the present court was so intent on preserving the ACA despite its fatal flaws, such as its directives about who should receive premium subsidies, that "we should start calling this law SCOTUScare." SCOTUS is the abbreviation for the Supreme Court of the United States.

The barb came across to some as intended for Roberts. The Cato Institute's Shapiro one-upped Scalia by calling the ACA "RobertsCare."

Legal experts say the majority opinion penned by Roberts did the ACA another favor in addition to upholding subsidies in all states: It was fashioned in such a way as to prevent future Republican presidents from gutting the law by executive decree.

"To Improve Health Care Markets, Not to Destroy Them"

The case of King v Burwell, named after one of the plaintiffs and US Department of Health and Human Services Secretary Sylvia Burwell, did not center on great constitutional issues such as whether the federal government could require someone to buy health insurance. Instead, it was an exercise in statutory construction, or interpreting the text of the law.

The Internal Revenue Service (IRS) did not read the law literally when it extended premium subsidies, which take the form of tax credits, to individuals buying coverage in all 50 states, no matter who created their exchanges. Aside from the four words "established by the state" in section 36B, the IRS determined that the law as a whole clearly intended everyone to receive the assistance if they were financially eligible.

In an initial defeat for the King plaintiffs, a federal district judge in Richmond, Virginia, agreed with the IRS reading of the law. The US Court of Appeals for the Fourth Circuit also upheld subsidies in states with federally established exchanges, but on a different legal basis — that court deemed section 36B ambiguous on the matter of subsidy eligibility. The ambiguity, however, allowed the appellate court to defer to the executive branch's interpretation of the law under a 1984 Supreme Court precedent called Chevron USA v Natural Resources Defense Council. "Chevron deference," as it is called, essentially gives the executive branch the benefit of the doubt as long as its reading of an ambiguous statute is reasonable.

In its ruling Thursday, the Supreme Court also determined that the troublesome "established by the state" clause in Section 36B was fuzzy on the subject of subsidies. Unlike the Fourth Circuit, however, the high court refused to give Chevron deference to the IRS, saying that the Congress would not have delegated the dispensation of billions of federal dollars to an agency without healthcare policy expertise.

Instead, the court took it upon itself to "determine the correct reading of 36B," and did so by looking at the "broader structure of the Act." It essentially hewed to the Obama's administration's argument that premium subsidies were a key part of an interlocking healthcare reform plan that would fall apart in their absence. The law guarantees everyone coverage regardless of preexisting conditions, and insurers cannot charge enrollees higher premiums on account of preexisting conditions. Lest only sick people buy insurance and make it too expensive for insurers to stay in business, the law requires everyone — healthy and sick alike — to obtain coverage or else pay a penalty. However, to make the mandate fair, there are premium subsidies for those who otherwise might not be able to afford insurance.

The court reasoned that denying subsidies to residents of the 34 states with federally established exchanges made no sense because it would undermine the very purpose of the law: extending health insurance coverage. Instead, such an interpretation of section 36B would wreck the federally established exchanges, according to the court. In addition to making coverage less affordable, the elimination of subsidies would exempt many people from the individual mandate who otherwise would have been deemed financially able to buy an exchange plan. Without the mandate, young healthy Americans would choose to remain uninsured, skewing insurance risk pools toward older, sicker Americans.

Faced with a more expensive demographic to care for, insurers would be forced to raise their rates, making coverage less affordable and the insurance risk pool even smaller and sicker, according to the court's analysis. The result would be a "death spiral" for the exchange, as well as the entire individual insurance market in the state.

Lawmakers could not have envisioned this, Roberts wrote in the majority opinion.

"Congress passed the [ACA] to improve health insurance markets, not to destroy them," the opinion stated. "If at all possible, we must interpret the act in a way that is consistent with the former, and avoids the latter."

In his dissent, Scalia ripped the majority opinion for ignoring the plain meaning of "established by the state."

"Under all the usual rules of interpretation...the government should lose this case," he wrote. "But normal rules of interpretation seem always to yield to the overriding principle of the present court: The [ACA] must be saved."

Scalia was right, said Ilya Shapiro at the Cato Institute.

"Roberts rewrote the law," he said. "Roberts twisted the words."

To Emory University's Robert Schapiro, however, the majority opinion was "good, old-fashioned statutory interpretation," the kind that used to be the norm before the high court tacked in Scalia's direction after he joined it in 1986. The Scalia approach, he said, is to put the text of a law under a microscope without much attention to its overarching purpose. And the Scalia approach says that it is not the court's job to save poorly worded legislation from itself.

"It was really a revolutionary way of interpreting statutes," said Schapiro. With the court ruling 6 to 3 in the subsidy case, he said, the Scalia revolution has suffered a major setback.

Swinging With the Supremes

Students of the Supreme Court consider its ideological makeup when they place bets on how it will rule in a given case. Four liberal-leaning members appointed by Democrat presidents — Associate Justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor — frequently vote as a block, and three Republican appointees — Scalia, Alito, and Thomas — make up an ultraconservative bookend. Roberts and Associate Justice Anthony Kennedy are two other Republican appointees who, although conservative, lean toward the middle and often represent swing votes in 5–4 decisions. A prime example is the June 26 decision to uphold gay marriage in all 50 states, in which Kennedy swung over to the liberal camp for the margin of victory.

The 6–3 vote in the subsidy case surprised Robert Schapiro, who, like others, had envisioned another 5–4 split.

Schapiro said he suspected that Kennedy might vote with the four liberal justices. "He's shown that he's not a textualist in the Scalia camp," said Schapiro.

Roberts was a question mark, however. Would he side with Scalia and take "established by the state" at face value, regardless of the repercussions?

"With all eyes upon him in this high-stakes case, he adopted the traditional view of statutory construction," said Schapiro. "I think we're learning about him."

In contrast, Lawrence Gostin, a health law professor at Georgetown University in Washington, DC, said he expected a 6–3 vote in favor of the Obama administration. Gostin had already counted Kennedy as a subsidy supporter based on the justice's remarks during oral arguments in March.

"I think Kennedy was swayed by the burdens on the states if their citizens lost federal subsidies," Gostin told Medscape Medical News. "Once Kennedy went with the liberal wing, it was likely Roberts would follow. In that way he could write the opinion and maintain control over the reasoning."

The Chevron Card

Legal commentators have made much of the court's decision to uphold subsidies in all states without falling back on Chevron deference; that is, trusting a federal agency to interpret an ambiguously worded law. If the court had gone this route, it would have handed the Chevron card to a future Republican president who, acting through the IRS, might try to rescind premium subsidies based on a different reading of the law. This aspect of the Roberts opinion has implications for the 2016 presidential race, said Robert Bradner, an attorney and healthcare policy expert at the national law firm of Holland & Knight.

"A presidential candidate can't promise, 'I'll change the interpretation of the law,' " Bradner told Medscape Medical News.

Although Ilya Shapiro thinks the court's ruling was a terrible mistake, he calls the absence of Chevron deference a possible silver lining.

"That pernicious bit of 1984 jurisprudence," Shapiro wrote in in his Cato Institute blog, "has enabled the administrative state to explode in the last three decades and, had Roberts relied on it, would really have allowed the executive branch to legislate without any real limit."

Opponents of the ACA such as Shapiro still can hope that Republicans in Congress, perhaps with the help of a Republican president, will repeal the act. And there are still lawsuits out there that seek to cripple the law. The GOP-controlled House of Representatives, for example, sued the Obama administration last fall for overstepping its authority in implementing the law, such as in unilaterally delaying the employer mandate.

However, there appears to be a consensus among legal experts that the ACA will no longer face do-or-die moments in the Supreme Court.

"The Roberts court is not going to abolish or significantly impair Obamacare," said Robert Bradner. "This law is here to stay."

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