King v. Burwell Expanded Obamacare Even More than You Know

This article appeared on National Review (Online) on July 29, 2015.

In King v. Burwell, Chief Justice John Roberts did the Obama administration a bigger favor than he realized. Writing for a himself and five colleagues, Roberts blessed the administration’s expansion of the Affordable Care Act’s individual mandate, employer mandate, and premium subsidies in the 34 states that refused to establish exchanges — even though the majority, to say nothing of the three dissenters, recognized that expansion was in direct conflict with “the most natural reading of the pertinent statutory phrase.”

In fact, as enacted by Congress, the ACA denies the government authority to implement those taxes and subsidies in any state. By disregarding the plain meaning of the operative statutory language, the Roberts court not only unwittingly headed off a second wave of similar lawsuits in the 16 states that did choose to establish exchanges. It effectively ratified a nationwide system of taxes and entitlements that no Congress ever authorized.

The ACA directs states to establish health‐​insurance “exchanges” and directs the secretary of Health and Human Services to establish exchanges in states that fail to do so. For those who buy coverage, it authorizes premium subsidies, but only “through an Exchange established by the State.” The mere availability of those premium subsidies triggers — indeed, is currently triggering — penalties against individuals and employers who fail to purchase the mandated coverage.

All nine justices agreed that “the most natural reading of the pertinent statutory phrase” is that the subsidies and resulting taxes are not authorized in states with federal exchanges. By extending those measures to the 34 states that refused to establish exchanges themselves, the government is imposing never‐​legislated taxes on 70 million Americans.

Yet another feature of the ACA, one never raised before any court, is that, in effect, Congress also required the federal government to establish exchanges in all 50 states. Just as the ACA directs the secretary of HHS to establish exchanges in states that fail to establish their own, it also directs her to establish exchanges in states that fail to establish a reinsurance program. Or a risk‐​adjustment program. Or that fail to implement the ACA’s numerous health‐​insurance regulations.

Indeed, if a state “fail[s]” to “elect” to implement any of these “requirements,” Congress left the secretary no discretion: “the Secretary shall … establish and operate such Exchange … and … implement such other requirements.” Since the most natural reading of the pertinent statutory phrase is that a federal exchange means no subsidies, the ACA as written thus conditions subsidies on the states’ implementing each of those requirements.

This is unsurprising. Congress cannot command states to implement federal programs. The ACA’s authors therefore did what Congress does in Medicaid and elsewhere: They conditioned federal benefits on state cooperation. Indeed, they conditioned those benefits on states’ implementing each part of the ACA’s regulatory scheme, on which they expected states to take the lead. That level of care and precision undercuts, even obliterates, Roberts’s claim that it is “implausible” that Congress could have intended to condition the disputed taxes and entitlements on state cooperation.

And as it happens, not a single state elected to meet those requirements. Only Connecticut elected to establish a reinsurance program. Only Massachusetts elected to establish a risk‐​adjustment program. No state elected to establish both. The ACA, as enacted by Congress, therefore leaves the HHS secretary no discretion. She must establish exchanges in all states. That means that premium subsidies are not authorized in any state.

Had the justices simply upheld the ACA as Congress wrote it, they would have immediately freed 70 million Americans in 34 states from unauthorized taxes, and enabled 30 million Americans in the remaining 16 states (California, New York, etc.) to sue for similar relief — if Congress didn’t provide relief first, which is both likely and how democracy is supposed to work. Instead, the Court allowed the IRS to continue implementing a nationwide system of taxes and entitlements in direct conflict with the words Congress chose to govern the question presented.

Now, 100 million Americans are living under taxes no Congress ever authorized, that no Congress had the votes to authorize, and that Congress allowed only if their states met certain requirements. Millions of taxpayers nationwide are buying unwanted coverage or paying penalties under the individual mandate, even though “the most natural reading of the pertinent statutory phrase” exempts them. Every employer who pays a penalty for failing to offer minimum affordable coverage is paying a tax from which Congress exempted them. In effect, so are the millions of workers who lose income when employers take steps to avoid those penalties.

Those involved with King decided not to draw attention to the fact that the disputed taxes and entitlements lack authorization even in states that chose to establish exchanges. The fear was that if judges thought that ruling for the plaintiffs might eliminate premium subsidies in every state instead of just 34 states, they would have been even less willing to do so. Roberts’s elevation of consequences over text in King vindicated that fear.

The administration probably had different reasons for not acknowledging that all states had failed to take the steps necessary to avoid a federal exchange. For one thing, it would have been awkward for the government to admit that it was ignoring a congressional command to establish exchanges in all states. For another, while bringing this statutory command to the courts’ attention might have made judges even more skittish about ruling for the plaintiffs, doing so also could have had the opposite effect, by lending credence to the argument that conditioning subsidies on state cooperation was an intentional design choice. Perhaps the administration feared that the Court might find the long list of conditions the ACA imposes on premium subsidies to be unconstitutionally coercive. Or perhaps the simplest explanation is the best: The administration wasn’t even aware of this requirement, because it never read the bill that closely.

Whatever the case, President Obama and the Roberts court have damaged the separation of powers, the rule of law, and political comity by repeatedly usurping Congress’s exclusive power to amend this polarizing statute. Even in defeat, King v. Burwell brings one of the worst of those abuses into the light.

Only partially, though. The abuse committed in King is even worse than the chief justice’s opinion tells.

Michael F. Cannon

Michael F. Cannon is director of health‐​policy studies at the Cato Institute. Modern Healthcare magazine dubbed him “the intellectual father” of King v. Burwell.