Obamacare on Appeal: Statutory Construction of This Politically Charged Question Will Inevitably Be Called Judicial Activism

By Derek Stikeleather,

In June, I wrote here that law professors should use the Supreme Court’s reversal of a Fourth Circuit opinion (CTS Corp. v. Waldburger) as their case study to teach the complexity of statutory construction. But I fear that a subsequent pair of conflicting, high-profile opinions in the D.C. Circuit and Fourth Circuit construing the Patient Protection and Affordable Care Act (“ACA”) is what many law professors will be using to teach statutory construction. Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014), rehearing en banc granted (Sep. 4, 2014), and King v. Burwell, No. 14-1158 (4th Cir. July 22, 2014), are attractive as important cases that present a pure question of statutory construction, but using them to teach statutory construction runs the risk that students will see statutory construction as a mere euphemism for partisan “judicial activism.” The opinions are best used to instead explore the precarious role of appellate judges in resolving politically charged controversies.

One reason why I embraced the Waldburger opinions as ideal for teaching statutory construction was that they “defy the cynical view that conflicting appellate opinions reflect merely the competing policy views of the appellate judges or their nominating sponsors/political parties.”  Halbig and King, in contrast, play right into this popular, negative view of the judiciary; the various opinions, concurrences, and dissents to date have closely aligned with the perceived political views or loyalties of the jurists. Regardless of the results, the decisions in these cases will undoubtedly amplify partisan cries of “judicial activism.” This rancor distracts from the already difficult task of statutory analysis and makes these opinions – admittedly fascinating and significant – ones to avoid when teaching statutory construction.

It is important to lay out exactly how the two courts came to conflicting results despite applying the same rules of statutory construction to the same discrete piece of enacted legislation. In Halbig, a split panel held that the ACA, popularly known as “Obamacare,” unambiguously limits the federal subsidies for insurance purchased on American Health Benefit Exchanges to exchanges “established by the State.” Halbig, slip op. at 5. It therefore vacated an IRS regulation that interpreted the law to permit credits for insurance purchased on either a state- or federally-established exchange. Id. Because only 16 of the 50 states have established their own state exchanges (the other 34 states have let the federal government establish their state exchanges), the Halbig ruling has the potential to dismantle the Affordable Care Act.

After finding the statute unambiguous, the Halbig majority recognized a “fork in [the D.C. Circuit’s] precedent” on whether unambiguous statutory language requires the court to (1) cease its inquiry right there and enforce that language or (2) consider the legislative history and legislative intent in deciding the statute’s meaning. Id. at 30-31. But it held that both roads ultimately led to the same result because the “scant legislative history sheds little light on the precise question of the availability of subsidies on federal Exchanges.” Id. at 32. Given what it considered the clear, unambiguous statutory language, it would only deviate from that language if the Government could prove that applying the statute literally would compel an “odd result” that is “demonstrably at odds with the intentions of the ACA’s drafters.” Id.

Just hours after Halbig was handed down, the Fourth Circuit issued its unanimous, contrary holding in King that the same IRS regulation permissibly construed the law to allow credits for insurance purchased on either a state- or federally-established exchange. For the King majority, the applicable statutory language was “ambiguous and subject to multiple interpretations,” which called for deference to the IRS’s reasonable interpretation as a “permissible exercise of the agency’s discretion.” Id. at 5. Concurring in the result, Senior Judge Davis wrote separately that the only reasonable interpretation of the ambiguous text is that it allows subsidies for federally-established state exchanges. See id. at 38.

This jurisprudential split regarding the proper construction of the ACA amplifies the lesson of Waldburger: Plain language is not so plain and clear legislative intent is not so clear. The Halbig and King courts both applied plain-language statutory construction to decide whether a health exchange “established by the State” can include a state health exchange established by the federal government. They reached different results because they disagree on the fundamental threshold question that guides their remaining analysis: Is the statute ambiguous? Halbig concluded that it is not, which put an enormous burden on the Government to overcome the plain and literal meaning of “established by the State.” King conceded the literal meaning of the clause “established by the State,” but reasoned that a sentence or clause is not read in isolation to determine its meaning, King, slip op. at 18 – a point on which the Halbig panel agreed, recognizing that it must read the clause as “but one piece of a vast, complex statutory scheme” and consider its relationship “to the ACA’s interconnected provisions and overall structure.” Halbig, slip op. at 14.

King and Halbig first parted where King found that the statutory language in Section 1321, which directs the federal government to establish exchanges in states that do not establish their own, reasonably suggests that such exchanges are covered by Section 1311’s operative clause, which limits federal subsidies to exchanges “established by the State.” King, slip op. at 20. King conceded that “a literal reading of the statute undoubtedly accords more closely with [Plaintiffs’] position” that federally-established state exchanges are ineligible for federal subsidies. Id. But King ultimately held that both parties’ compelling arguments showed that the statute is ambiguous. Id. Halbig carefully dissected the same Government argument regarding Section 1321 but concluded that the provision did not make Section 1311’s phrase “established by the State” ambiguous or a term of art that includes federally-established exchanges. Halbig, slip op. at 16-22.

With stakes so high, Halbig and King have fueled intense legal analysis and political commentary not only in the appellate legal community but also in mainstream media. (Halbig has also triggered en banc review by the full D.C. Circuit.) Regardless of their positions, most commentators are quick to paint themselves as judicial moderates who are appropriately deferential to Congress, while painting the opposing side’s rationale as politically motivated, judicial overreaching that undermines Congress.

In my view, in tackling politically controversial legislation that contains a drafting error or oversight, the judges here are damned if they do and damned if they don’t. Although a vocal minority argues that the limitation on subsidies was a calculated plan by Congress that backfired on proponents of the ACA, King noted there is “no compelling support in the legislative history” for the argument that Congress intended to give the states virtual veto power over the ACA. King, slip op. at 27. Meanwhile, the Halbig majority stated that it is bound to apply unambiguous legislative provisions as written even if they “may seem odd.” Halbig, slip op. at 23. Few would disagree that, given the history and purpose of the ACA, the limitation on federal subsidies to only those exchanges “established by the State” seems “odd” at the least.

But even if all judges agreed that the “odd” limitation on subsidies was merely a legislative oversight, they would still be split on how the oversight should be corrected. Are judges improperly assuming the role of legislators by ignoring a phrase’s literal meaning to honor what they reasonably see as the legislation’s intent? Or do judges improperly assume the legislative role by overriding IRS regulations that are designed to honor the legislation’s intent? And do the enormous consequences of a judicial opinion – here, the fate of national health insurance – change the calculus? Should judges work harder to “save” important legislation than they would to save relatively insignificant laws? Or should they work harder to save legislation when the political coalition that had passed it no longer exists and cannot be re-formed in Congress to supply the necessary language? With the D.C. Circuit set to receive further briefing for the en banc court this fall, it will be interesting to see how the judges wrestle with the inevitable charges that, regardless of how they resolve this major political question, they are overstepping their bounds as appellate judges and obstructing the will of Congress.