The ACA Survives — But With A Note Of Caution For The Future?

2015-06-30 | Health Affairs Blog

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Chief Justice Roberts has once again saved a core provision of the Affordable Care Act (ACA). In King v Burwell, a majority of six Justices upheld the validity of an Internal Revenue Service (IRS) rule interpreting the text of the ACA to permit tax credits to be distributed through both state and federal insurance exchanges. As a result, the millions of Americans receiving subsidies through federally established exchanges in the states that have not chosen to establish their own exchanges will continue to receive them.

The Reasoning of the Opinion — And Why It’s Important

Much of the briefing and argument in King involved the legal principle known as Chevron deference, in which courts generally defer to agencies’ reasonable interpretations of statutes if the statutory language is ambiguous. In this case, the government first argued that the statutory language clearly permitted tax credits to be made available on federally established exchanges. But even if the statute was ambiguous, it contended, Chevron counseled deference to the IRS’ reasonable interpretation of the statute.

Critically, Chief Justice Roberts held for the government without resorting to Chevron at all. That is, the majority opinion declared that it was the task of the Court, not the IRS, to interpret the relevant provision of the statute. And in the Court’s view, a thorough consideration of not only the text but also the purpose and structure of the Act led it to agree with the government’s interpretation.

Although on its face the choice to apply Chevron deference or to have the Court interpret the statute on its own may seem of interest only to lawyers, it is important more broadly. If the Court had held that the language of the ACA was ambiguous but then opted to defer to the IRS’ interpretation under Chevron, a subsequent presidential administration (perhaps a Republican one) might have been able to reinterpret the statute and decide that subsidies would no longer be made available on federal exchanges. The reasoning of the Chief Justice’s opinion precludes that possibility: the subsidies are here to stay.

With regard to the subsidies, King offers stability. But the Chief Justice’s decision not to apply Chevron deference deserves further scrutiny; his reasoning may create more uncertainty for administrative agencies and the government going forward.

Why the Court Chose Not to Apply Chevron

Chief Justice Roberts offered two reasons for declining to defer to the IRS’ interpretation of the ACA. First, whether tax credits are available on federal exchanges is an “extraordinary” question of deep “economic and political significance.”

In other words, because the tax subsidies play such an important role in the structure of the ACA, the Court will not defer to the IRS unless Congress had explicitly requested it. Second and relatedly, the IRS “has no expertise in crafting health insurance policy,” and therefore “[i]t is especially unlikely that Congress would have delegated this decision” to that agency.

Administrative law professors like Jody Freeman, Cass Sunstein, and Chris Walker have written about what the Chief Justice’s logic here may mean for administrative law more broadly. But I want to focus on what these two aspects of the Chief Justice’s logic may mean for health law in particular.

What Does the Court’s Logic Mean Going Forward?

With his first argument, the Chief Justice invoked what administrative law scholars call the “major questions” doctrine. If Congress wants to delegate interpretive authority over a major policy question to an administrative agency, it must speak clearly in doing so.

This may seem straightforward, but the problem is that the Court rarely invokes the major questions doctrine, and it has not given content to the term. How do we know when a question is “major”? The doctrine is applied inconsistently, and the Court has avoided invoking it in some of the biggest, most high-stakes cases.

As early as 2012, legal scholars had supposed that this very IRS rule might provide an opportunity for the Court to give content to the major questions doctrine. But Chief Justice Roberts spent just one sentence in King explaining the importance of the IRS’ rule. In his words, the tax credits “involve[] billions of dollars in spending each year and affect[] the price of health insurance for millions of people.”

But many—perhaps most—of the ACA’s myriad reforms “involve[] billions of dollars in spending each year and affect[] the price of health insurance for millions of people.” And based on the Court’s past invocations of the major questions doctrine, the relevant “spending” need not even be government spending, as it is in this case — it might simply be that the industry involved plays a sufficiently large role in our economy, as the many facets of the health care system surely do.

The Chief Justice’s logic could apply far more broadly, if the Court so chose. In some of these cases Congress may have delegated interpretive authority explicitly, but in many or most of them it will not have. The effect would be for the judiciary to arrogate power to itself which most observers (academics, policymakers, and the regulated industry alike) believe resides within the administrative state at present. This would create uncertainty within the regulated industry, as hospitals, insurers, employers, and others would be less sure about the legal validity of the rules that are enforced against them.

Perhaps the Chief’s second argument, though, might cabin this expansive interpretation of the major questions doctrine. That is, in King the problem is not only the importance of the question – it is also the asserted naivete of the agency deciding it. (The Chief Justice does not explain the relationship between the two arguments, and so although it is possible that each individually provides a sufficient basis on which to avoid applying Chevron, it is also possible that only together do the two arguments justify that conclusion.)

But here’s the problem: the IRS regularly makes health-related rules. There are hundreds of health-related federal regulations implemented by the IRS, dealing with topics as central as discrimination on the basis of health status, minimum essential coverage, and mental health parity, to name just a few. It is conceivable that the major questions doctrine would now apply to each of these rules.

Health law history buffs will remember that before the Internal Revenue Code of 1954 explicitly made health insurance a non-taxable benefit rather than taxable income, it was an IRS rule from 1943 that had made it so. Today, this law provides a subsidy estimated at $250 billion per year to 149 million people. Considering that the ACA’s premium tax credits in the 34 states potentially imperiled by a decision in King implicated only $20 billion per year to 6.4 million people, I’d say that’s “major.”

Going forward, it is difficult to say whether courts will be interested in invoking the major questions doctrine more frequently after King, particularly in the health field. But there are still lessons for all parties involved. For instance, the IRS might seek to issue regulations jointly with other agencies, as it has in the HIPAA context.

At present, the IRS surely consults with the Department of Health and Human Services and other relevant agencies in issuing rules like the one involved in King, but involving those agencies formally might mitigate the force of the Chief Justice’s second argument. More generally, scholars and policymakers will want to watch future cases closely for further developments.

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