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King v. Burwell (U.S. Sup. Ct.)

King v. Burwell was a challenge to a key component of the Patient Protection and Affordable Care Act (“ACA”), a landmark law dedicated to achieving widespread, affordable health care.  The ACA provides that individuals can purchase competitively-priced health insurance on American Health Benefit Exchanges (“Exchanges”) that may be run by either the States or the federal government.  It also authorizes a federal tax credit for low- and middle-income individuals who purchase insurance on the Exchanges.  The Internal Revenue Service (“IRS”) issued a regulation confirming that the federal tax credit is available to all financially eligible Americans, regardless of whether they purchase insurance on a state-run or federally-facilitated Exchange. 

The plaintiffs in King filed a lawsuit in the United States District Court for the Eastern District of Virginia, challenging the IRS rule on the ground that the ACA authorizes tax credits only for individuals who purchase insurance on state-established Exchanges.  The ACA opponents argued, among other things, that the purpose of the tax credit provision is to induce States to set up their own Exchanges, under penalty of withdrawal of those credits and subsidies if States chose to allow the federal government to operate Exchanges in their stead. 

The attorneys who represented the plaintiffs in King also brought a similar lawsuit in the United States District Court for the District of Columbia.  On January 15, 2014, the district court in that case, Halbig v. Burwell, ruled in favor of the IRS.  The plaintiffs in Halbig appealed, and on February 14, 2014, CAC filed an amici curiae brief in the United States Court of Appeals for the District of Columbia Circuit supporting the federal government.  That brief was filed on behalf of members of Congress who led the enactment of the ACA, including then-Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, as well as state legislators who served during the period when their state governments were deciding whether to create their own Exchanges.

On February 18, 2014, the district court in King, like the district court in Halbig, rejected the plaintiffs’ arguments and granted the government’s motion to dismiss the case.  The plaintiffs in King appealed the decision to the United States Court of Appeals for the Fourth Circuit, and on March 21, 2014, CAC filed an amici curiae brief in the Fourth Circuit, again on behalf of members of Congress and state legislators.

On July 22, 2014 (in an opinion authored by Judge Roger Gregory and joined by Judges Stephanie Thacker and Andre Davis), the Fourth Circuit held that the IRS regulation confirming that tax credits and subsidies are available to individuals purchasing health insurance through the federal as well as state Exchanges was a “permissible exercise of the agency’s discretion.”  Concurring in a separate opinion, Judge Davis noted that the ACA challengers’  “cramped” reading of the statute was “not supported by the legislative history or by the overall structure of the Act,” and concluded that “a holistic reading of the Act’s text and proper attention to its structure lead to only one sensible conclusion: The premium tax credits must be available to consumers who purchase health insurance coverage through their designated Exchange regardless of whether the Exchange is state- or federally-operated.”  (You can read CAC’s reaction to King here.)

The same day that the Fourth Circuit issued its ruling in King, the D.C. Circuit, by a 2-1 vote, issued a contrary ruling in Halbig.  (You can read about the Halbig decision here and read CAC’s reaction here.  The D.C. Circuit’s opinion in Halbig was subsequently vacated when the full D.C. Circuit agreed to re-hear the case en banc.)

On July 31, 2014, the plaintiffs in King filed a cert. petition asking the Supreme Court to hear the case, which the Court granted on November 7, 2014.  (In light of the Court’s decision to review King, the D.C. Circuit issued an order holding Halbig in abeyance pending the Court’s disposition of King.)

On January 28, 2015, as we did in the lower courts, we filed an amici curiae brief in the Supreme Court on behalf of current and former members of Congress who were actively involved in the debates over the ACA and more than 100 current and former state legislators, all of whom were active in their states’ deliberations about whether to create their own state-based Exchange. Like our briefs in the Courts of Appeals, our brief explained that the purpose of the tax credit provision is to facilitate access to affordable insurance through the Exchanges, not, as the ACA opponents argued, to incentivize the establishment of state Exchanges above all else, and certainly not to thwart Congress’s fundamental purpose of making insurance affordable for all Americans.  Our brief demonstrated that there is no evidence in the legislative history of the ACA to suggest that Congress ever intended or communicated to the States that the availability of the tax credit depended upon the establishment of a state Exchange.  In fact, we showed that the opposite was true:  everyone, including amici members of Congress, understood that tax credits would be available to purchasers on all of the Exchanges. Further, state government officials never understood the tax credits to be limited to state-run Exchanges.  Rather, as the state legislator amici knew from their own experiences, the States considered many factors in deciding whether or not to set up their own Exchanges, and the possibility that not setting up a state-run Exchange would result in the loss of tax credits to the State’s citizens was never one of those considerations.

The Court heard oral argument on March 4, 2015.

On June 25, 2015, in a 6-3 ruling, the Court rejected the ACA’s challengers’ arguments, as CAC had urged.  In an opinion authored by Chief Justice Roberts, the Court held that tax credits are available to individuals in states that utilize a federally-facilitated Exchange.  According to Roberts, because the phrase “an Exchange established by the State” is ambiguous as it relates to tax credits, the Court must look to the broader text and structure of the Act to determine the meaning of that phrase.  The Court correctly ruled that, when the text of the ACA is considered as a whole, tax credits must be available to all qualifying citizens in every state; holding otherwise, the Court explained, would disrupt the interlocking reforms Congress put in place to achieve the law’s goal of affordable health care for all Americans.  With this ruling, the Court affirmed the understanding of the ACA that has been held by state governments and members of Congress since the Act’s inception—that tax credits are available to eligible citizens for insurance purchased on any Exchange created under the ACA, be it state-run or federally-facilitated.