More than (four) words

The viability of the Affordable Care Act’s subsidies in 36 states is going to be decided by the Supreme Court.  King v. Burwell, the Fourth Circuit iteration of a multi-pronged challenge to availability of health insurance tax credits across much of the country, has been granted cert by the Court to be heard this term.

I’ve written about these cases (focusing on the D.C. Circuit case, Halbig v. Sebelius Burwell) frequently (I, II, III, IV, and V). But as the case readies for it’s moment before the Highest Court, I wanted to take a moment to address a clever rhetorical deceit that is being propagated by those cheering on the subsidy challenge.

That’s the idea that this is a cut and dry case, a foretold outcome based on the unambiguous text of the statute. Take George Will: “Four words in the ACA could spell its doom.” “The four words that threaten disaster for the ACA,” Will writes, “say the subsidies shall be available to persons who purchase health insurance in an exchange ‘established by the state.’ But 34 states have chosen not to establish exchanges.”

Or take Patrick Wyrick, the solicitor general of Oklahoma, who is challenging the law’s subsidies in a separate suit.  “The phrase ‘Exchange established by a state under Section 1311’ ​leaves nothing to the IRS’s imagination​,” he argues at SCOTUSblog.

Indeed, the architect of these lawsuits, Michael Cannon of the Cato Institute, asserts much the same, contending that “the tax-credit eligibility rules ‘clearly say’ exchange subsidies are available only through state-established exchanges,” and that any ambiguity has been retrospectively manufactured by the government’s lawyers.

There’s a reason the challengers in King are so adamant that this is a simple, unambiguous case. If there is any ambiguity in the statute — any uncertainty whatsoever in whether the text permits subsidies in non-exchange states — the challengers likely lose. That’s because ambiguity triggers so-called Chevron deference to the IRS’s interpretation of the law, which favors making subsidies available in all states.

It could also trigger constitutional avoidance doctrine, since the challengers’ constitutionally troublesome and coercive reading of the law would have to compete with the government’s abjectly constitutional, non-coercive reading of how the subsidies operate.

But if what the law says is clear and unambiguous, then there’s no discretion for the IRS to employ, and no deference owed to its interpretation. And there’s no constitutional avoidance obstructing the challengers’ path to victory, because there would be no alternative reasonable interpretation at hand.

Now “established by the State” sounds pretty unambiguous, right? Pretty damning for the government and the law’s supporters, no?

Of course it does. But it’s also a neat sleight of hand, because those four dooming words aren’t the ones that this case hinges on.

Instead, the case turns on two words, not four. Those two words are “such Exchange.” See, Section 1311 of the law instructs that each state create a health exchange. But Congress can’t order the states to do anything, so it created a federal fallback. For states that don’t elect to run their own exchanges, Congress said, the federal government would step in to “establish and operate such Exchange within the State.”

What’s more, the term “Exchange” in the statute is defined as “an American Health Benefit Exchange established under [section 1311 of the ACA].” That’s the section that directs states to create exchanges.

So what does “such Exchange” mean, exactly? One eminently plausible interpretation is that, if you connect the daisy chain of definitions and provisions laid out above, the federal government creates the functional equivalent of an exchange established by the state in each non-compliant state. That is, for purposes of the statute, the federal government can create an “exchange established by the State.”

Counterintuitive, sure. But it’s clearly a reasonable interpretation, as I’ve explained before. And the meaning of “such” is what split the lower courts in the first place. Shouldn’t this alone be enough to suggest ambiguity, which in turn triggers deference to the IRS’s interpretation?

One would think so.  But the ObamaCare challengers evidently insist that the federal government can only create “an exchange,” not “such Exchange,” for it can create one with all the attributes of a state-created exchange except for subsidy availability. Where’s the support for this in the text?

The challengers’ case looks a lot weaker when we hone in on the text of the law that really matters to this case. And liberals like Paul Krugman ought to stop arguing that the law is facing “death by typo,” for it concedes that the law’s text as written can’t accommodate subsidies on the federal exchange.

That’s only the case if you accept the challengers’ false framing of the language that this case turns on. They’re trying to hide the ball behind the seemingly open-and-shut certainty of “established by the State.” But that’s not the language that really matters. And the fact that “such Exchange” is ambiguous is just enough to expose the challengers’ case to potentially crippling vulnerabilities that could spell their doom before the Supreme Court.