King v. Burwell, the day after

The consensus following oral argument in King v. Burwell is that the votes of two Justices are in play. Based on the questioning, it seems clear that the four-judge liberal bloc will vote to affirm the decision that Obamacare subsidies may be granted to those using the federal exchange. Justices Scalia and Alito appear set to vote to reverse that decision. Justice Thomas did not ask questions — his usual practice — but is considered a likely third vote for reversal.

This leaves Chief Justice Roberts and Justice Kennedy as the “swing” votes. To reverse — i.e., to rule that subsidies are not permissible on the federal exchange — both would have to vote this way.

Note that at least one of the two was probably inclined last year to reverse. Otherwise it’s unlikely that there would have been four votes to hear the case in the absence of a split among the Circuit Courts of Appeal. But that was then; this is now.

Chief Justice Roberts said little during the argument that can be interpreted as indicating how he will vote in King. By contrast, Justice Kennedy said a mouthful.

As I noted yesterday, Kennedy expressed serious “constitutional” concern about a system that coerces states to create exchanges as a condition of their residents being eligible for federal subsidies with which to purchase Obamacare-compliant insurance policies. The coercion stems, in Kennedy’s view, from the fact that, absent the subsidies, a “death spiral” might occur in the insurance markets of states that don’t agree to establish exchanges.

Kennedy’s concern could cause him to interpret the statute as not establishing such a coercive regime, but instead providing subsidies on the federal exchange, as the government argues.

Kennedy’s constitutional concern is unwarranted in my opinion. As Randy Barnett points out, eight states filed amicus briefs in support of petitioners. They argued that they don’t want exchanges or subsidies. These states clearly don’t feel “coerced.”

Moreover, the government didn’t raise any constitutional concern as a basis for interpreting the statute as permitting subsidies on the federal exchange. It’s true that the government would rarely question the constitutionality of a federal statute, especially the landmark statute of the current administration.

However, the government could have made the “constitutional avoidance” argument without attacking the constitutionality of Obamacare. It could simply have argued that the statute does not limit subsidies to the state exchanges and, if it had included a provision so limiting them, that provision would be unconstitutional.

The government did not make this argument, though. And yesterday, its lawyer described the argument as raising a novel issue. Perhaps he agrees with Oklahoma Attorney General Scott Pruitt that “there is no legal precedent for a finding of coercion based solely on the fact that a federal program does not work well when the states decline to assist in its implementation.”

In any event, the “avoidance” doctrine only comes into play if the statute is ambiguous. If the language of the statute is clear, it must be construed consistently with its plain meaning whether or not that construction renders the provision unconstitutional.

But what counts here is how Justice Kennedy views the matter. On this question, I recommend Ed Whelan’s “parsing” of Kennedy’s comments. At one point, Kennedy stated “it may well be that [the challengers are] correct as to these words, and there’s nothing we can do” to interpret them in a different way.” If so, the government should lose Kennedy’s vote.

Moreover, to the extent that a constitutional concern exists, what is the best way to deal with it? According to Barnett, the best approach would be to “limit subsidies to exchanges ‘established by the state,’ and then invite states who feel coerced to choose to bring a coercion challenge in the future.” Whelan finds some basis in Kennedy’s comments for believing that he might opt for this approach.

Finally, what would the remedy be if the Court found a valid constitutional concern? Do you rewrite the statute to make subsidies available in states that don’t establish exchanges? Or do you strike down the federal insurance regulations that allegedly create the “death spiral” and thereby threaten to “destroy” state insurance markets unless states set up exchanges?

Barnett argues that the latter remedy makes more sense.

At the end of “day after,” we see that this case has plenty of moving parts including, let’s not forget, how Chief Justice Roberts views these matters. In the previous Obamacare case, Roberts decided that it would be unconstitutionally coercive for Congress to tell the states that unless they accept the extension of Medicaid, they will lose their Medicaid funding.

Perhaps the Chief Justice sees a similar problem here. Perhaps, as liberal law professor Noah Feldman speculates, Justice Kennedy was trying to convince Roberts that such a problem exists, so that Kennedy’s vote will not be the one that saves Obamacare.

The outcome of King v. Burwell is in doubt, but the odds seem to favor the government.

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