In the olden days of newspapers, typesetters were instructed in no uncertain terms to make no changes in a reporter’s copy even to correct an obvious mistake. “Follow the copy out the window,” typesetters were told.
Two federal appeals court judges misapplied that rule in a decision last week that struck at the heart of President Obama’s health care reform for two-thirds of the country. Focusing on one 10-word phrase in the 2,000-page Affordable Care Act, the two D.C. Circuit judges barred the intended subsidies for people with marginal incomes in the 36 states that have left it to the federal government to run health insurance exchanges.
The majority judges in Halbig v. Burwell ignored the act’s overall text and purpose. Instead, they followed the critical phrase straight out the window without exercising the judgment that judges, though not typesetters, are expected to apply. Not coincidentally, the two judges Thomas Griffith and A. Raymond Randolph are Republican appointees who were applying the hyper-textual method of statutory construction propounded by that most Republican of Supreme Court justices, Antonin Scalia.
The issues in the case and the separate, same-day ruling the other way from the Fourth Circuit, King v. Burwell have been rehashed endlessly over the last week. The Affordable Care Act provides that states “shall” establish health care exchanges to offer affordable insurance for people, for example, not covered through employer-provided plans. In a political compromise, however, the mandate became an option: the federal government would establish the exchange in any state that opted out.
To make the new insurance marketplaces affordable, income-adjusted tax credits were to be provided for people with incomes between 100 percent and 400 percent of the federal poverty line roughly, $11,000 to $44,000 for singles. In the critical statutory language, the tax credits are to be provided to participants in health care exchanges “established by the State under section 1311 of the act.”
Nothing is said there about exchanges established by the federal government. In hindsight, this was oversight. But the legislative drafters most likely did not anticipate that Republican governors and lawmakers would dislike Obamacare so much that they would opt out of serving their constituents and leave it to the feds instead.
The Internal Revenue Service (IRS) exercised its rulemaking authority under the law to make tax credits available to participants in the federal exchanges. The IRS cited two other sections of the law. One defines an exchange as “a governmental agency or nonprofit entity that is established by a State.” The other authorizes the federal government “to establish and operate such Exchange within the state” if the state declines (emphasis added).
Clearly though not to the D.C. Circuit majority the law envisions that the federal exchanges have the same status as the state exchanges. One of the Fourth Circuit judges said the law says exactly that, unambiguously. The other Fourth Circuit judges and the D.C. Circuit dissenter said the law is ambiguous but the IRS is entitled under Supreme Court precedent to deference on how to resolve the ambiguity.
Significantly, the health insurance tax credits are not gravy but the very meat and potatoes of Obamacare. Without the tax credits, health insurance is unaffordable for many; without those new customers, insurance rates will go up for the rest. And without the tax credits, the individual mandate to obtain insurance and the employer mandate to provide health insurance are not enforced. In short, as the Fourth Circuit stated, “the economic framework supporting the Act would crumble if the credits were unavailable on federal Exchanges.”
In the D.C. Circuit decision, Griffith acknowledged the ruling would have “significant consequences” and insisted that he and Henderson were reaching their conclusion “frankly, with reluctance.” Regardless, their overly literalistic approach thwarts congressional intent. As Judge Andre Davis wrote in a concurring opinion in the Fourth Circuit case, “No case stands for the proposition that literal readings should take place in a vacuum, acontextually, and untethered from other parts of the operative text; indeed, the case law indicates the opposite.”
Among outside commenters, Abbe Gluck, a Yale law professor and expert on statutory construction, also effectively skewered the D.C. Circuit decision. The ruling, Gluck wrote in an article for Politico, “does a deep disservice to conservative jurists and lawyers who have spent the last 30 years arguing that text-based interpretation is sophisticated, not literalistic, and serves democracy.”
Judicial handicappers are betting that the D.C. Circuit decision will not stand. The Obama administration will ask for an en banc rehearing before the full court, which now includes seven Democratic- and four Republican-appointed judges. The Democratic appointees are seen as likely votes for the administration’s position not merely because of their background but because of their different, whole-law approach to statutory construction.
The issue might reach the Supreme Court anyway, where Scalia would likely command two or three votes to uphold the D.C. Circuit’s decision. But Chief Justice John G. Roberts Jr. and Justice Anthony M. Kennedy are not wedded to Scalia’s nothing-but-the-text approach. And Roberts, many observers speculate, will again hesitate to risk the court’s institutional capital on Obamacare.
Time will tell, but for now the case is an object lesson in the consequences of a judicial technique that proponents portray as restraint but operates instead as anti-democratic judicial activism.