The Third Way: How Chief Justice Roberts Could Placate Conservatives And Save Obamacare

CREDIT: AP Photo/Charles Dharapak

On Friday, the Supreme Court unexpectedly agreed to hear a case known as King v. Burwell, which seeks to defund much of the Affordable Care Act and send the individual insurance markets in many states into a “death spiral.” Should this lawsuit prevail, millions of people who are currently insured through Obamacare are likely to lose their insurance and thousands of people are likely to die every year who otherwise would have lived.

On the surface, the case presents an all or nothing choice for the Court’s conservatives. Either they reverse a lower court decision that did not defund the law and hand a sweeping victory to their fellow conservatives who oppose the Affordable Care Act; or they affirm the court’s decision, earning the gratitude of the people who will die without a fully operational law and the scorn of the law’s opponents. In reality, however, there is a third option that will hand a significant doctrinal victory to conservatives while simultaneously protecting the lives of the many Americans who depend upon Obamacare insurance plans. And Chief Justice John Roberts’ previous Obamacare decision offers some hope that he will choose this third option.

For the plaintiffs in King to prevail, the Supreme Court must read a single passage of the Affordable Care Act out of context. That passage, which refers to “an Exchange established by the State,” seems to suggest the law only provides subsidized health insurance to people who reside in states that set up their own health care marketplaces — and not to states that opted to have the federal government set up the state’s health exchange for them. Yet, when this passage is read in the context of the entire statute — as more than a century of Supreme Court precedent says that it must be — it is absolutely clear that the law does not deny subsidies to people who live in the wrong state. We explain why here and here, and Yale Law professor Abbe Gluck explains why here.

Just as importantly, even the law’s opponents did not believe that Obamacare denies subsidies to people in the wrong states until King and its sister cases began to make their way through the courts. As Justices Scalia, Kennedy, Thomas and Alito explained in their joint dissent calling for the entire Affordable Care Act to be repealed, the subsidies are an essential element of the law’s core provisions. “Without the federal subsidies,” the four justices wrote, “individuals would lose the main incentive to purchase insurance inside the exchanges, and some insurers may be unwilling to offer insurance inside of exchanges.” Indeed, without subsidies, “the exchanges would not operate as Congress intended and may not operate at all.”

This view, that the law “would not operate as Congress intended” unless the subsidies were available on each health exchange, was shared by 36 Republican senators who joined a brief opposing the law in the Supreme Court. In that brief, they explained that the law is “dependent on each of its interlocking provisions,” a reference to Obamacare’s subsidies, its insurance reforms, and its individual mandate. Most importantly of all, the governors or attorneys general of 24 different states signed a brief explaining that the Affordable Care Act’s “core provisions” — provisions that include the subsidies — “are carefully constructed to work in unison to achieve Congress’ paramount goal of ‘near-universal’ insurance coverage.” The Affordable Care Act “can only operate in the manner that Congress intended—a manner that achieves near-universal insurance coverage” if all of its core provisions including its subsidies remain “intact.”

Now, however, the plaintiffs in King ask the justices to hold that the subsides were not, in fact, intended to “work in unison” with the law’s other provisions. Instead, they argue that Congress actually intended to allow each state to turn off these subsidies simply by electing to have the federal government run their health exchange.

The reason why these statements from conservative justices, senators and state officials matter is because they raise grave constitutional doubts about the King plaintiffs’ interpretation of the law. The attorneys representing these plaintffs claim that the subsidies were intended as an “inducement” to convince states to set up their own exchanges. Under their theory, Congress viewed the question of whether health marketplaces would be run by state or federal bureaucrats as a matter of such superseding importance that they used the threat of lost subsidies to extort states into running their own exchanges. The subsidies, in other words, were part of “a variety of ‘carrots’ and ‘sticks’ to induce states to establish Exchanges voluntarily.”

Congress does have the constitutional authority to pressure states in this way, but its authority to do so is limited. As 18 states explain in an amicus brief supporting the government’s position that subsidies are available nationwide, the Constitution does not permit the federal government to condition the payment of federal money on a state taking a particular action “if a State is unaware of the conditions or is unable to ascertain what is expected of it.” Moreover, as the Supreme Court explained in 2006, the question of whether a state is able to ascertain whether federal money comes with conditions must be evaluated “from the perspective of a state official who is engaged in the process of deciding whether the State should accept . . . the obligations that go with those funds.”

This is why it matters so much that, before King reached the Supreme Court, the chief executives or chief legal officers of 24 states joined a brief indicating that the law “can only operate in the manner that Congress intended” if the subsidies are “intact.” If the law actually does set up the system of “carrots” and “sticks” that the plaintiffs attorneys’ suggest, top officials in 24 states were “unable to ascertain” this fact.

The amicus brief filed on behalf of the 18 states provides additional evidence that state officials were not able to ascertain what the King plaintiffs now claim to be obvious. In 2012, former Virginia Gov. Bob McDonnell (R) wrote that his state would opt to allow the federal government to set up its exchange because there was no evidence of any “clear benefits of a state run exchange to our citizens.” Nebraska Gov. Dave Heineman (R) wrote said that “[o]n the key issues, there is no real operational difference between a federal exchange and a state exchange.” And Kansas Gov. Sam Brownback (R) actually claimed involving his state government with Kansas’ health exchange would cost his constituents money. “My administration will not partner with the federal government to create a state-federal partnership insurance exchange,” he said, “because we will not benefit from it and implementing it could cost Kansas taxpayers millions of dollars.”

It is difficult to square any of these statements with the King plaintiffs’ claim that Obamacare unambiguously denies subsidies to the residents of states with federally-run exchanges.

Historically, conservatives have favored limiting Congress’s power to condition federal money on state action, while liberals have been more supportive of a robust federal power permitting Congress to impose such conditions. The Supreme Court’s most recent case applying the requirement that federal grants with strings attached must clearly convey the nature of those strings to state officials was joined by all five of the Court’s conservatives, for example, with the Court’s four more liberal members breaking from the majority opinion.

That brings us back to Chief Justice Roberts. In 2012, Roberts saved the bulk of the Affordable Care Act, but his decision to do so came at a price. His opinion shrunk Congress’s power to make conditional grants — preventing many low-income Americans from receiving Medicaid in the process — and it imposed new doctrinal limits on Congress’s power to enact regulation under two provisions of the Constitution. Roberts, in other words, has already shown a willingness to cross his fellow conservatives on Obamacare if he can shave off some of Congress’s power in the process.

The argument raised in the 18 states’ brief gives Roberts that opportunity. In the past, the Court has generally applied its conditional grants doctrine to grants that give money directly to a state in return for the state taking a particular action. The King plaintiffs claim, by contrast, that the Affordable Care Act gives money to a state’s residents if the state takes a specific action. Thus, applying the rules governing conditional grants to the plaintiffs’ interpretation of Obamacare would extend a constitutional limit on congressional power to an area where the Court typically has not applied it. The argument presented by the 18 states, in other words, lets Roberts build a wall around congressional power while simultaneously saving the lives of the many Americans who will die without Obamacare subsidies.

If Roberts’ previous decisions are any indication, that may be enough to convince him to give those Americans a stay of execution.