![if gte IE 9]><![endif]><![if gte IE 9]><![endif]><![if gte IE 9]><![endif]><![if gte IE 9]><![endif]><![if gte IE 9]><![endif]>
Not a Lexis+ subscriber? Try it out for free.
LexisNexis® CLE On-Demand features premium content from partners like American Law Institute Continuing Legal Education and Pozner & Dodd. Choose from a broad listing of topics suited for law firms, corporate legal departments, and government entities. Individual courses and subscriptions available.
WASHINGTON, D.C. — (Mealey’s) The Patient Protection and Affordable Care Act (ACA)’s structure suggests the availability of tax subsidies in the federal exchange, and Congress could not have intended the state insurance market “death spirals” likely to result from barring such subsidies, a divided U.S. Supreme Court held June 25 (David King, et al. v. Sylvia Mathew Burwell, et al., No. 14-114, U.S. Sup. [lexis.com subscribers may access Supreme Court briefs for this case]).
(Opinion available. Document #93-150722-001Z.)
The majority said the petitioners’ “plain meaning arguments are strong.”
However, subsidies in the federal exchanges “are necessary for the federal exchanges to function like their state exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid,” the majority said.
Virginia residents David King, Douglas Hurst, Brenda Levy and Rose Luck sued Kathleen Sebelius, secretary of Health and Human Services; the Department of Health and Human Services (DHHS); Jacob Lew, secretary of the Treasury; the Department of Treasury; Daniel Werfrel, acting commissioner of the IRS; and the IRS in the U.S. District Court for the Eastern District of Virginia, saying the IRS improperly interpreted the ACA.
Sebelius resigned and was replaced by Sylvia Mathews Burwell.
Virginia is one of 34 states that choose not to establish its own exchange and thus relies on the federal exchange.
The IRS defined “exchange established by the state” to mean “a state exchange, a regional exchange, subsidiary exchange, and federally-facilitated exchange.” The rule means that premium-assistance subsidies are available in all states, including those states that declined to establish their own exchanges.
Judge James R. Spencer rejected the plaintiffs’ claims, saying courts have a duty to construe statutes as a whole and that the plaintiffs’ reading of ACA Section 36B grows weak when other sections of the ACA are taken into account.
The plaintiffs appealed, and a Fourth Circuit U.S. Court of Appeals panel found “a certain sense to the plaintiffs’ position” but that the government has “the stronger position, although only slightly.”
The plaintiffs appealed, and the Supreme Court agreed to hear the case.
The majority rejected the petitioners’ argument that Congress would not have needed to use the phrase “established by the state” if it intended to speak about exchanges generally. The majority said the court’s preference for avoiding “surplusage construction” is not absolute.
“And specifically with respect to this act, rigorous application of the canon does not seem a particularly useful guide to a fair construction of the statute,” the majority said.
The majority noted that the ACA was enacted specifically to avoid death spirals in state insurance markets and that invalidating the subsidies would likely result in those death spirals in states that chose not to establish an exchange.
When read in its entirety, the law is clear that subsidies should be available in the federal exchanges, the majority said.
Chief Justice John G. Roberts Jr. wrote the majority opinion, in which Justices Anthony M. Kennedy, Ruth Bader Ginsburg, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan joined.
Justice Antonin Scalia, joined by Justices Clarence Thomas and Samuel A. Alito Jr., called “quite absurd” the majority’s reading of “established by the state” to mean “established by the state or the federal government.” Especially in light of the fact that Congress repeatedly used the term “exchange” when it wanted to speak generally about exchanges and specifically mentioned that territories that establish exchanges are to be treated as states, Justice Scalia said.
Justice Scalia said “it is hard to come up with a clearer way to limit tax credits to state exchanges than to use the words ‘established by the state.’”
Jonathan Berry and Yaakov M. Roth of Jones Day in Washington represent the plaintiffs. Donald Verrilli Jr., Acting Assistant Attorney General Joyce R. Branda and attorneys Mark B. Stern and Alisa B. Klein of the Department of Justice in Washington represent the government.
[Editor's Note: Lexis subscribers may download the document using the link above. The document(s) are also available at www.mealeysonline.com or by calling the Customer Support Department at 1-800-833-9844.]
For all of your legal news needs, please visit www.lexisnexis.com/mealeys.
Lexis.com subscribers may search all Mealey Publications.
Non-subscribers may search for Mealey Publications stories and documents at www.mealeysonline.com or visit www.Mealeys.com.
Mealey's is now available in eBook format!
For more information about LexisNexis products and solutions, connect with us through our corporate site.