__ U.S. __ (2015), 14-114, King v. Burwell

Docket Nº:14-114
Citation:__ U.S. __, 135 S.Ct. 2480, 192 L.Ed.2d 483, 83 U.S.L.W. 4541
Opinion Judge:ROBERTS, CHIEF JUSTICE
Party Name:DAVID KING, ET AL., PETITIONERS v. SYLVIA BURWELL, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL
Attorney:Michael A. Carvin argued the cause for petitioner. Donald B. Verrilli, Jr. argued the cause for respondents.
Judge Panel:ROBERTS, C. J., delivered the opinion of the Court, in which KENNEDY, GINSBURG, BREYER, SOTOMAYOR, and KAGAN, JJ., joined. SCALIA, J., filed a dissenting opinion, in which THOMAS and ALITO, JJ., joined. JUSTICE SCALIA, with whom JUSTICE THOMAS and JUSTICE ALITO join, dissenting.
Case Date:June 25, 2015
Court:United States Supreme Court
SUMMARY

The Patient Protection and Affordable Care Act (42 U.S.C 18001) includes “guaranteed issue” and “community rating” requirements, which bar insurers from denying coverage or charging higher premiums based on health; requires individuals to maintain health insurance coverage or make a payment to the IRS, unless the cost of buying insurance would exceed eight percent of that individual’s income; and seeks to make insurance more affordable by... (see full summary)

 
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__ U.S. __ (2015)

135 S.Ct. 2480, 192 L.Ed.2d 483, 83 U.S.L.W. 4541, 25 Fla.L.Weekly Fed. S 430

DAVID KING, ET AL., PETITIONERS

v.

SYLVIA BURWELL, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL

No. 14-114

United States Supreme Court

June 25, 2015

Argued March 4, 2015

Editorial Note:

This opinion is uncorrected and subject to revision before publication in the printed official reporter.

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Affirmed.

SYLLABUS

[135 S.Ct. 2481] [192 L.Ed.2d 486] The Patient Protection and Affordable Care Act grew out of a long history of [135 S.Ct. 2482] failed health insurance reform. In the 1990s, several States sought to expand access to coverage by imposing a pair of insurance market regulations--a " guaranteed issue" requirement, which bars insurers from denying coverage to any person because of his health, and a " community rating" requirement, which bars insurers from charging a person higher premiums for the same reason. The reforms achieved the goal of expanding access to coverage, but they also encouraged people to wait until they got sick to buy insurance. The result was an economic " death spiral" : premiums rose, the number of people buying insurance declined, and insurers left the market entirely. In 2006, however, Massachusetts discovered a way to make the guaranteed issue and community rating requirements work--by requiring individuals to buy insurance and by providing tax credits to certain individuals to make insurance more affordable. The combination of these three reforms--insurance market regulations, a coverage mandate, and tax credits--enabled Massachusetts to drastically reduce its uninsured rate.

The Affordable Care Act adopts a [192 L.Ed.2d 487] version of the three key reforms that made the Massachusetts system successful. First, the Act adopts the guaranteed issue and community rating requirements. 42 U.S.C. § § 300gg, 300gg-1. Second, the Act generally requires individuals to maintain health insurance coverage or make a payment to the IRS, unless the cost of buying insurance would exceed eight percent of that individual's income. 26 U.S.C. § 5000A. And third, the Act seeks to make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 percent and 400 percent of the federal poverty line. § 36B.

In addition to those three reforms, the Act requires the creation of an " Exchange" in each State--basically, a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own Exchange, but provides that the Federal Government will establish " such Exchange" if the State does not. 42 U.S.C. § § 18031, 18041. Relatedly, the Act provides that tax credits " shall be allowed" for any " applicable taxpayer," 26 U.S.C. § 36B(a), but only if the taxpayer has enrolled in an insurance plan through " an Exchange established by the State under [42 U.S.C. § 18031]," § § 36B(b)-(c). An IRS regulation interprets that language as making tax credits available on " an Exchange," 26 CFR § 1.36B-2, " regardless of whether the Exchange is established and operated by a State . . . or by HHS," 45 CFR § 155.20.

Petitioners are four individuals who live in Virginia, which has a Federal Exchange. They do not wish to purchase health insurance. In their view, Virginia's Exchange does not qualify as " an Exchange established by the State under [42 U.S.C. § 18031]," so they should not receive any tax credits. That would make the cost of buying insurance more than eight percent of petitioners' income, exempting them from the Act's coverage requirement. As a result of the IRS Rule, however, petitioners would receive tax credits. That would make the cost of buying insurance less than eight percent of their income, which would subject them to the Act's coverage requirement.

Petitioners challenged the IRS Rule in Federal District Court. The District Court dismissed the suit, holding that the [135 S.Ct. 2483] Act unambiguously made tax credits available to individuals enrolled through a Federal Exchange. The Court of Appeals for the Fourth Circuit affirmed. The Fourth Circuit viewed the Act as ambiguous, and deferred to the IRS's interpretation under Chevron U.S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694.

Held :

Section 36B's tax credits are available to individuals in States that have a Federal Exchange. Pp. 7-21.

(a) When analyzing an agency's interpretation of a statute, this Court often applies the two-step framework announced in Chevron, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694. But Chevron does not provide the appropriate framework here. The tax credits are one of the Act's key reforms and whether they are available on Federal Exchanges is a question of deep " economic and political significance" ; had Congress wished to assign that question to an agency, it surely would have done so expressly. And it is especially unlikely that Congress would have delegated this decision to [192 L.Ed.2d 488] the IRS, which has no expertise in crafting health insurance policy of this sort.

It is instead the Court's task to determine the correct reading of Section 36B. If the statutory language is plain, the Court must enforce it according to its terms. But oftentimes the meaning--or ambiguity--of certain words or phrases may only become evident when placed in context. So when deciding whether the language is plain, the Court must read the words " in their context and with a view to their place in the overall statutory scheme." FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133, 120 S.Ct. 1291, 146 L.Ed.2d 121. Pp. 7-9.

(b) When read in context, the phrase " an Exchange established by the State under [42 U.S.C. § 18031]" is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it could also refer to all Exchanges--both State and Federal--for purposes of the tax credits. If a State chooses not to follow the directive in Section 18031 to establish an Exchange, the Act tells the Secretary of Health and Human Services to establish " such Exchange." § 18041. And by using the words " such Exchange," the Act indicates that State and Federal Exchanges should be the same. But State and Federal Exchanges would differ in a fundamental way if tax credits were available only on State Exchanges--one type of Exchange would help make insurance more affordable by providing billions of dollars to the States' citizens; the other type of Exchange would not. Several other provisions in the Act-- e.g., Section 18031(i)(3)(B)'s requirement that all Exchanges create outreach programs to " distribute fair and impartial information concerning . . . the availability of premium tax credits under section 36B" --would make little sense if tax credits were not available on Federal Exchanges.

The argument that the phrase " established by the State" would be superfluous if Congress meant to extend tax credits to both State and Federal Exchanges is unpersuasive. This Court's " preference for avoiding surplusage constructions is not absolute." Lamie v. United States Trustee, 540 U.S. 526, 536, 124 S.Ct. 1023, 157 L.Ed.2d 1024. And rigorous application of that canon does not seem a particularly useful guide to a fair construction of the Affordable Care Act, which contains more than a few examples of inartful drafting. The Court nevertheless must do its best, " bearing in mind the 'fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.'" Utility Air Regulatory [135 S.Ct. 2484] Group v. EPA, 573 U.S. __, __, 134 S.Ct. 2427, 189 L.Ed.2d 372, 391. Pp. 9-15.

(c) Given that the text is ambiguous, the Court must look to the broader structure of the Act to determine whether one of Section 36B's " permissible meanings produces a substantive effect that is compatible with the rest of the law." United Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, Ltd., 484 U.S. 365, 371, 108 S.Ct. 626, 98 L.Ed.2d 740.

Here, the statutory scheme compels the Court to reject petitioners' interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, [192 L.Ed.2d 489] and likely create the very " death spirals" that Congress designed the Act to avoid. Under petitioners' reading, the Act would not work in a State with a Federal Exchange. As they see it, one of the Act's three major reforms--the tax credits--would not apply. And a second major reform--the coverage requirement--would not apply in a meaningful way, because so many individuals would be exempt from the requirement without the tax credits. If petitioners are right, therefore, only one of the Act's three major reforms would apply in States with a Federal Exchange. The combination of no tax credits and an ineffective coverage requirement could well push a State's individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation, but those requirements only work when combined with the coverage requirement and tax credits. It thus stands to reason that Congress meant for those provisions to apply in every State as well. Pp. 15-19.

(d) The structure of Section 36B itself also suggests that tax credits are not limited to State Exchanges. Together, Section 36B(a), which allows tax credits for any " applicable taxpayer," and Section 36B(c)(1), which defines...

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