Justice Kennedy Gave Us a Window Into His Thinking at the King v. Burwell Argument This Morning— and It Appears to Be Good News for the Government

When the Supreme Court heard oral argument this morning in King v. Burwell, the latest challenge to the Affordable Care Act, everyone was eager to hear what Chief Justice John Roberts and Justice Anthony Kennedy, widely viewed as the likely swing voters in the case, would have to say.  Chief Justice Roberts was uncharacteristically quiet during the argument, but Justice Kennedy wasn’t.  He asked a number of questions that seem to provide a good window into his thinking, and supporters of the ACA should be happy about what that window appears to have revealed.


The basic question at the heart of King is about the meaning of the ACA—whether it provides tax credits to all individuals who qualify based on income, or only those individuals who live in states that set up their own Exchanges, as the law’s challengers argue based on looking at just four words in the statute taken out of the context of the law as a whole.  The government, and the questions of several justices, including Justices Stephen Breyer and Elena Kagan, made clear that if you look at the text of the law as a whole (as the Court’s precedents require), tax credits should be available nationwide. 


Justice Kennedy’s questions, however, focused not on the text of the law, but on the constitutional implications if the Court were to adopt the interpretation offered by the law’s challengers.  Specifically, he expressed concern that the interpretation offered by the ACA’s opponents would raise a “serious constitutional question” because it would mean that the states were coerced into creating their own Exchanges, something the Constitution arguably forbids (the Solicitor General described the question as a “novel” one). 


Justice Kennedy explained why this would be as a factual matter: under the challengers’ reading of the law, “the States are being told either create your own Exchange, or we’ll send your insurance market into a death spiral.”  In other words, if the states chose not to create their own Exchange, the federal government would limit the states’ authority over their insurance markets by requiring the issuance of insurance without regard to preexisting conditions and pricing on a community rating basis, and thereby put in place a market that would be inherently dysfunctional because it would lack the tax credits that are necessary for it to work properly.  (Indeed, even the Justices most critical of the government didn’t deny that the consequences of eliminating tax credits from states with federal exchanges would be significant; Justice Samuel Alito, for example, raised the possibility that the Court might take the unusual act of staying its decision precisely because the consequences would be so severe.)  To Justice Kennedy, this was alarming, because normally when Congress imposes a spending condition on a state, the state may turn down the money and retain the status quo.  Here, by contrast, under the challengers’ reading of the ACA, the states would face significant and damaging consequences if they elected not to set up their own Exchange.  Worse yet, they never even had clear notice of the consequences that would result if they failed to set up their own Exchange, an important reason in its own right that those, like Justice Kennedy, who worry about federalism values should rule in favor of the government, as briefs filed in support of the government made clear.


To Justice Kennedy, it was incumbent upon the Court and counsel to confront that “serious constitutional question.”  When the attorney for the law’s challengers noted that the government hadn’t made this argument, Justice Kennedy retorted, “Sometimes we think of things the government doesn’t.”  Kennedy also explained that this constitutional question has to be in the “background of how we interpret . . . this statute.”  In making this point, Justice Kennedy was invoking a legal doctrine known as “constitutional avoidance.”  There are a couple of different strains of constitutional avoidance, but basically the doctrine tells a court that if there are two plausible readings of a law, and one would raise serious constitutional questions, the court should adopt the other one.  In essence, it’s the court giving Congress the benefit of the doubt that it would not enact an unconstitutional law.


If Justice Kennedy thinks the ACA raises a serious constitutional question under the interpretation advanced by the law’s challengers, then he should vote for the government as long as it has offered an alternative reading that he views as plausible under the text of the law.  Justice Kennedy’s other questions at argument suggest that he may still be puzzling over the text of the law, but as Solicitor General Don Verrilli and other Justices made clear, he needn’t puzzle for long.  When one engages in the standard approach to interpreting laws, the government has not only offered a plausible reading of the statute; it’s offered the only one. 


Indeed, this standard approach to interpreting laws was the one thing on which everyone—including counsel for the law’s challengers—agreed at argument this morning: when it comes to understanding what a law means, one can’t just look at a few words in isolation; one must look at the law as a whole.  Indeed, just last week, Justice Kennedy signed onto a dissenting opinion written by Justice Elena Kagan that said: “I agree with the plurality (really, who does not?) that context matters in interpreting statutes. We do not ‘construe the meaning of statutory terms in a vacuum.’ Rather, we interpret particular words ‘in their context and with a view to their place in the overall statutory scheme.’”  And Justice Kennedy has previously made exactly the same point, writing in 2006 that “[i]nterpretation of a word or phrase depends upon reading the whole statutory text, considering the purpose and context of the statute, and consulting any precedents or authorities that inform the analysis.”


When one looks at the text of the ACA as a whole, it’s clear that tax credits should be available on all Exchanges, both state-run and federally-facilitated.  As Justice Breyer’s careful parsing of the statute at oral argument made clear, the law provides that if a state doesn’t set up its own Exchange, the federal government will set up “such Exchange” in its stead; that federal Exchange is the functional equivalent of the Exchange that the state would have set up if it elected to do so.  As he asked the attorney for the law’s challengers, “So what’s the problem?”  And as was discussed at argument at length this morning, other provisions of the law also support the government’s reading and avoid the numerous anomalies that the alternative reading advanced by the ACA’s challengers would create.  Neither the attorney for the law’s challengers—nor the Justices most critical of the government’s position—offered compelling answers to these arguments. 


In short, there was a great deal in Justice Kennedy’s questions this morning that should give hope to supporters of the ACA.  To be sure, opponents of the law might tell a different story.  But they’ll have to take Justice Kennedy’s questions out of context in order to do so.  Of course, it wouldn’t be the first time they’ve taken language out of context.