Dueling Appellate Court Opinions on Obamacare: Where Do We Go From Here?

This morning, as Steve noted earlier, a panel of the D.C. Circuit Court of Appeals held, in Halbig v. Burwell, that the Affordable Care Act does not permit the federal government to subsidize persons who enroll in exchanges run by the federal government, as opposed to a state. Just two hours later, a panel of the 4th Circuit Court of Appeals ruled the other way on exactly the same issue in King v. Burwell. A great deal hinges on this: I believe everyone agrees that if the federal government cannot subsidize participants in the federal exchange (which covers 36 states), Obamacare will collapse.

The issue is one of statutory construction: what did Congress intend? Where a statute is unambiguous, there is no further inquiry; Congress intended what it wrote. The D.C. Circuit opinion explains succinctly plaintiffs’ argument that the ACA clearly authorizes subsidies only for the state exchanges:

Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. § 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act.

In order to win, the government has to read the phrase “established by the State” out of the statute. It is noteworthy, however, that the D.C. Circuit did not stop with the plain language of the law. It considered, and rejected, the government’s argument that applying the statute literally leads to absurd results–odd, perhaps, but not absurd. You can read the court’s opinion, both the majority and the dissent, here:


The 4th Circuit opinion says that the statute is ambiguous, despite the seemingly-clear phrase, “established by the State.” It goes on to consider various ways of reconciling the ambiguity, concluding that the government has the better of the argument, albeit not decisively. The decision, then, rests on the principle of deference to an administrative agency (the IRS) if the agency’s interpretation of the statute is a reasonable one. (For thoughts on the baleful results of that principle, see our ongoing series, “Is Administrative Law Unlawful?”) Here is the 4th Circuit’s opinion:

4 Th Circuit Aca

It seems clear that this issue is headed for the Supreme Court. There may be an intermediate stop in the D.C. Circuit, as the entire court may choose to re-hear the case. If that happens, we may see the fruit of Harry Reid’s demolition of the filibuster rule. The Democrats desperately wanted to stack the D.C. Circuit with liberal judges, but were restrained from doing so by the need to marshal 60 votes for confirmation. With the filibuster out of the way, the Democrats needed only 51 votes for confirmation, and the court now has a 7 to 4 Democratic majority.

If the D.C. Circuit does re-hear the case en banc, it may reverse today’s panel decision. If that happens, there will no longer be a split between the circuits, but one would think the Supreme Court will take the case regardless. In that event, we may be back in familiar territory, with Justice Anthony Kennedy deciding what Congress had in mind. If you think that discerning Congress’s intent is, in this case, a fool’s errand, since no one in Congress had read the law before voting on it, you are probably right. Which is one reason why courts look to the words of a statute rather than to the subjective intentions of 535 legislators. Given that Justice Kennedy was willing to deal Obamacare what he thought was a death blow under the Commerce Clause, Democrats cannot view their ultimate prospects with much confidence.

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