Posted by: captainfalcon | July 24, 2014

The Latest ACA Litigation

There are two parallel debates concerning whether, under the ACA, participants in health exchanges created by the federal government, as opposed to a state government, are eligible to receive subsidies.  Unsurprisingly, in light of the way legal interpretation works, they concern the ACA’s text and the ACA’s purpose.

The first debate is textual.  One position, represented by the DC Circuit’s recent opinion, is that the participants in federally-created health exchanges are ineligible for subsidies because §36B of the ACA provides that subsidies are only available to participants in health exchanges that are “established by the State under § 1311.”  The contrary position, represented by the Fourth Circuit’s recent opinion, reasons from the fact that § 1321(c) provides that if a state fails to set up a health exchange the federal government may create a §1311 exchange, i.e. an exchange “that is established by a State” to the conclusion that subsidies are available to participants in federally-created exchanges because, under the linguistically tortured regime of the ACA, federally-created exchanges are exchanges “established by [a] State under §1311.”

The second debate concerns the purposes of the ACA and, depending on your taste, may inform the textual debate.  One side of this debate argues that prohibiting participants in federally-created exchange from receiving subsidies furthers one of the ACA’s purposes: to incentivize states to create their own health exchanges by making it so that citizens in states where the federal government has to create such exchanges do not enjoy federal subsidies.  The most compelling point on the other side [for the other side see here and here] is that the structure of the ACA makes no sense as an incentive to states to setup health exchanges because failing to provide subsidies to participants in federal-exchanges undermines the risk-pooling that is essential to the functioning of Obamacare.  Why provide for federally-created exchanges that, whenever they are created, will not work properly?  Instead, as Abbe Gluck argues, why not just provide for a “lose it or use it” structure a la Medicaid?

Other arguments on this side depend on observations about what congressmen actually intended / expected to occur e.g. absolutely nobody had any idea that the ACA’s text left it open to an interpretation on which participants in federally-created exchanges could not receive subsidies.  (And, as noted here, this is not surprising because, due to Ted Kennedy’s death, the version of the statute that passed the Senate and would ordinarily have gone through a linguistic cleanup process had to be passed as it was.)  I find this argument persuasive, but it has some suppressed premises — the actual expectations / intent of a statute’s drafters can be discerned and are relevant to statutory interpretation — that not everybody finds acceptable.

Ultimately, I think both text and purpose favors the conclusion that participants in federally-created exchanges are eligible to receive subsidies.  But non-frivolous arguments can be mustered for the contrary conclusion.*  So those who think Obamacare is bad have legal cover to prefer / argue for the DC Circuit’s point of view.

* Non-frivolous in the sense that (1) those who make them will not be subject to any professional sanctions and (2) if they are ultimately implemented the judiciary / the government more generally will not lose legitimacy.

Update: Will Baude makes a similar point about the different types of argument at play here.

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