Opponents of the Affordable Care Act have been caught off guard by the possibility that the challenge in King v. Burwell actually violates principles of constitutional federalism. The federalism argument has been made in two important Supreme Court amicus curiae briefs, one submitted on behalf of 22 states and the District of Columbia, and another on behalf of four law professors – Abbe Gluck, Gillian Metzger, Thomas Merrill, and Nicholas Bagley.

The federalism argument is based on the doctrine of Pennhurst State Hospital v. Halderman, 451 U.S. 1 (1981), written by then-Associate Justice William Rehnquist.  The professors’ brief explains that “Pennhurst and related decisions . . . broadly reflect a strong interpretive presumption that when Congress intends to impose conditions on States’ choices that would result in significant consequences, it does so unambiguously.”  Only with “clear notice” of such consequences, can states exercise choices offered by federal statutes, in a manner that enables them to “serve their proper role in the legislative process and in our federal system.”

Both briefs demonstrate that, if the King v. Burwell challengers’ interpretation is correct, states that refused to set up their own exchanges did not get the requisite “clear notice” that if they turned operation of their exchanges over to the federal government, they would strip their citizens of the tax credits and subsidies that currently help some 87% of them (on average) purchase insurance. Moreover, stripping these subsidies will likely cause the collapse of the exchanges themselves, and disrupt or quite possibly crash altogether these states’ entire individual (non-group) insurance markets. Under the doctrine of Pennhurst, these are pretty significant consequences and they require courts to interpret the statute to avoid springing these consequences on states unawares.  Hence, the challengers’ interpretation must be rejected, and the Obama administration’s competing interpretation – making tax credits and subsidies available nationwide – should be adopted.

On Tuesday, C. Boyden Gray, Adam White, and Adam Gustafson, who authored their own amicus brief in support of petitioners, tried to rebut the federalism argument in a guest post on the Volokh Conspiracy. (The post also references Professor Gluck’s January 27 Politico article summarizing  that argument, and Professor Marty Lederman’s March 2 post on Balkinization to similar effect.)

The gist of their argument is that:

“We’re not afraid to acknowledge Gluck’s . . . federalism argument; we just think it’s wrong on the merits.  [In the professors’ brief] she offers the following version . . . .

1.       Congress intended to subsidize all health insurance exchanges.

2.       If Congress had further intended to take subsidies away from States that did not establish their own exchanges, then it needed to state this intent with clearly stated terms.

3.       Because Congress did not state in sufficiently clear terms any intent to remove subsidies from those States, the statute should be construed not to take the subsidies away from them.”

. . . .

“The problem with this argument, however, is that it presumes the very issue before the Court: whether Congress intended to grant those subsidies to all States in the first place. Gluck and her colleagues are not answering the question presented-they’re begging it.”

But Gluck’s argument does not have to assume that “Congress intended to subsidize all health insurance exchanges.” All she has to assume is (2) and (3)—that draconian consequences followed from a choice offered to states by a federal law, and that there was no clear notice of those consequences; therefore courts should adopt the Government’s reasonable alternative interpretation that avoids those consequences (and also avoids the serious constitutional questions that would arise if courts accepted the challengers’ interpretation).

In the record of Congress’ enactment of the ACA, and Executive and state implementation, there is little if any room for serious dispute about the factual predicates of this simple two-step argument.  Even the challengers’ lawyers had no inkling of their own subsidy-nullifying interpretation until several months after the statute was signed into law.  As demonstrated by the amici brief submitted by the Constitutional Accountability Center on behalf of key Congressional leaders and state legislators, there is no contemporaneous evidence that states actually thought that they were being threatened with loss of subsidies when they made their decisions about whether to establish an exchange in the months after the ACA’s enactment. Gray, White, and Gustafson’s post does not even try to refute these facts; instead they offer an irrelevant lament that the Obama administration has tried to “replace federalism with nationalism.”

If the opponents of the ACA have an answer to the Pennhurst federalism argument, they have not yet managed to articulate it.