Private: The Alternative Reality of King v. Burwell

by Rob Weiner, formerly Associate Deputy Attorney General In the United States Department of Justice, is a partner at Arnold & Porter LLP.

*This post is part of the ACSblog King v. Burwell symposium.

In King v. Burwell, the Petitioners challenge an IRS rule granting tax subsidies under the Affordable Care Act to low income families in states with federal insurance Exchanges so that those families can buy health insurance.  The Government’s brief to the Supreme Court predicted that without the subsidies, insurance markets in the states with federal Exchanges would descend into death spirals.  Petitioners’ reply brief countered that even if this prediction were true:

[T]hese consequences are the result of the IRS Rule [allowing the subsidies], not the statute.  Had the IRS from the start made clear that subsidies were limited to state Exchanges, states would not have overwhelmingly refused to establish them.

The irony of this claim is thick.  From the start, opponents of the ACA mounted a campaign against the Exchanges, going so far as to dispatch traveling road shows in 2011-12 to lobby state legislatures against establishing them.  Ultimately, 34 states did as urged and declined to set up their own Exchanges.  Nonetheless, Petitioners now blame the IRS rule for that result.

The accusation is especially brazen because the opponents did not base these pitches on the IRS rule.  The American Legislative Exchange Council (ALEC), an influential right-wing group that focuses on state legislation and that commissioned its own anti-Exchange road show, adopted a resolution in October 2011 entreating states not to establish Exchanges.  Notably, the resolution assured the states that, “There is no penalty for a state in allowing the federal government to implement an Exchange.”  But the resolution mentioned neither the tax subsidies nor the IRS rule proposed two months earlier.  Likewise, the Heritage Foundation exhorted states to refuse to establish Exchanges, and it, too, did not base its argument on subsidies and the IRS rule.

Most telling, though, are the contemporaneous statements of Michael Cannon, the Cato Institute’s evangelist and architect of the theory advanced in King.  In testimony before state legislatures in 2011 and 2012, he argued that the unavailability of subsidies in states with federal Exchanges was a strong reason not to establish an Exchange.  For example, he told the Missouri legislature that:

[P]erhaps most important, due to a recently discovered glitch in the statute, the new health care law only authorizes premium assistance in state-run Exchanges -- not federal Exchanges.  States thus have the collective power to deny the administration the legal authority to dispense more than a half-trillion dollars in new entitlement spending, to expose the full cost of the law’s mandates and government price controls, as well as to enforce the law’s employer mandate -- simply by not creating Exchanges.  If Missouri joins other states in refusing to create an Exchange, it can essentially force Congress to reconsider the law. 

Moreover, in early 2011 -- before the IRS proposed its rule -- 21 Republican governors outlined to the HHS Secretary their stringent conditions for establishing a state Exchange.  None related to the subsidies in the Federal Exchanges.   Governor Mitch Daniels, writing about this proposal in the Wall Street Journal, said with regard to the Exchanges that, “If there's to be a train wreck, we governors would rather be spectators than conductors.”  Nowhere did Governor Daniels suggest that his citizens would be kicked off the train. When the Secretary refused the Governors’ demands, Cannon sermonized in the National Review that, “Having received this answer, the 21 governors should stick to their guns and join [Florida and Alaska] by refusing any additional Obamacare funds, returning the funds they have heretofore received, and declaring that they will not create any Obamacare Exchanges.”  For all practical purposes, they did.

Developments in the King case itself belie Petitioners’ effort to blame the IRS rule for the states’ refusal to establish Exchanges.  Eight states have filed amicus briefs in King arguing against subsidies for their own citizens.  None of these states has evinced any intention of establishing an Exchange.  It follows that their decision to let the federal government establish the Exchanges in their states did not turn on the IRS rule allowing subsidies. 

In sum, like so much else in their case, Petitioners’ claim about the IRS rule is fiction, and the overall plot is straight from Kafka.  At the core is the illogical claim that Congress’s strategy to coerce states into establishing Exchanges was to create a federal fallback Exchange, but to ensure that it would not work.  Petitioners surround that claim with a phalanx of surreal arguments -- for example, that Congress coerced the states with a threat so oblique the states did not even know they were being threatened.  And now Petitioners add the bizarre assertion that the IRS rule preventing insurance death spirals in state markets is responsible for the death spirals the absence of the rule will produce.

This type of  fractured logic may work in modernist literature,   In court, however, reasoning must be linear.  Factual claims must be supported.  And the outcome must turn on law, not dramatic -- or political -- impact.   Or at least, that's the way it is supposed to be.

Healthcare, Supreme Court