King v. Burwell
576 U. S. ____ (2015) (2015)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
Tax credits under the Patient Protection and Affordable Care Act are available to eligible individuals who purchase health insurance on an exchange, regardless of whether that exchange is established by a state or by the federal government.
Facts:
- Congress passed the Patient Protection and Affordable Care Act (ACA) to reform the individual health insurance market.
- The ACA's reforms are built on three interlocking pillars: prohibiting insurers from denying coverage based on health (guaranteed issue/community rating), requiring individuals to have insurance (individual mandate), and providing tax credits to make insurance affordable.
- These reforms were designed to work together to prevent an economic 'death spiral' where rising premiums cause healthy people to drop coverage, further increasing premiums.
- The ACA requires the creation of a health insurance 'Exchange,' or marketplace, in every state, which can be established either by the state itself or by the federal government as a fallback.
- The statutory provision authorizing tax credits, Section 36B of the Internal Revenue Code, calculates the credit amount based on insurance plans purchased through 'an Exchange established by the State.'
- The Commonwealth of Virginia, where petitioners David King and others resided, chose not to establish its own state exchange, leading the federal government to establish one.
- The Internal Revenue Service (IRS) issued a rule interpreting the ACA to allow tax credits for plans purchased on both state-run and federally-run exchanges.
- Because of the IRS rule, King and the other petitioners were eligible for tax credits, which made insurance affordable enough that they became subject to the ACA's individual mandate, requiring them to buy insurance they did not want or pay a penalty.
Procedural Posture:
- David King and other Virginia residents (Petitioners) filed a lawsuit in the U.S. District Court for the Eastern District of Virginia, challenging the validity of the IRS rule that extended tax credits to federally-run exchanges.
- The District Court, a trial court, dismissed the lawsuit, holding that the ACA unambiguously made tax credits available on all exchanges.
- The petitioners appealed the dismissal to the U.S. Court of Appeals for the Fourth Circuit.
- The Fourth Circuit affirmed the trial court's judgment, finding the statute ambiguous and deferring to the IRS's interpretation as a reasonable one under the Chevron doctrine.
- The Supreme Court of the United States granted certiorari to resolve a circuit split on the issue.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does the Patient Protection and Affordable Care Act authorize the Internal Revenue Service to provide tax credits for health insurance purchased on an exchange established by the federal government, despite statutory language referring to an 'Exchange established by the State'?
Opinions:
Majority - Chief Justice Roberts
Yes. The Patient Protection and Affordable Care Act must be interpreted to authorize tax credits on both state and federal exchanges to avoid the collapse of the health insurance markets it was designed to fix. While the phrase 'an Exchange established by the State' appears to limit credits to state-run exchanges when read in isolation, this reading is untenable when viewed in the context of the entire statutory scheme. The ACA's three key reforms—market regulations, the individual mandate, and tax credits—are inextricably linked. Withholding credits from federal exchanges would render the other two reforms ineffective in those states, leading to the very 'death spirals' Congress intended to prevent. This calamitous result is so contrary to the Act's purpose that the text, though inartfully drafted, must be read to include federal exchanges to fulfill the clear legislative plan.
Dissenting - Justice Scalia
No. The Patient Protection and Affordable Care Act unambiguously restricts tax credits to exchanges 'established by the State,' and the federal government is not a state. The majority's interpretation is 'quite absurd,' rewriting a clear statute to save it from its own consequences. The Court's role is to interpret the law as written, not to correct perceived drafting errors or rescue Congress from a flawed statutory design. The plain meaning of the text is clear, and any negative consequences of that meaning are a matter for Congress, not the judiciary, to address. By ignoring the clear text in favor of its preferred policy outcome, the Court abandons its judicial role, aggrandizes its own power, and effectively creates 'SCOTUScare'.
Analysis:
This decision is a landmark case in statutory interpretation, showcasing a victory for a purposivist or contextualist approach over strict textualism. The Court concluded that adhering to the 'plain meaning' of a specific phrase was inappropriate where it would fundamentally undermine the entire structure and purpose of a complex legislative act. The ruling also limited the application of 'Chevron deference' in 'extraordinary cases' of deep economic and political significance, asserting the judiciary's role in resolving such questions rather than deferring to an agency. This precedent solidifies the ACA and demonstrates the Court's willingness to look beyond literal text to prevent results it deems contrary to congressional intent.
