Three years ago, Justice Anthony Kennedy voted to declare the Affordable Care Act unconstitutional. So it should come as no great surprise that he expressed constitutional concerns in today’s ACA case, King v. Burwell.
His concerns tended to be the major focus of today’s Court coverage—as so often tends to be the case, given Justice Kennedy’s common role as the “swing justice,” the decisive fifth vote. In this morning’s case, his concerns focused primarily on federalism—on the impact that the ACA’s health exchange provisions, and the administration’s implementation of those provisions, could have on state insurance markets.
Under the ACA, the administration is authorized to subsidize health insurance purchased through an “Exchange established by the State.” The question before the Court, then, is whether that provision allows subsidies (and the attached penalties, such as the employer mandate and, for many people, the individual mandate) only in states that established their own exchanges. Or, as the administration contends, whether those subsidies and penalties also apply to states where the exchange was established by the Department of Health and Human Services because the state elected not to.
As the transcript shows, Justice Kennedy focused primarily on federalism—namely, the negative impact that states without state exchanges may feel if the administration can’t subsidize health insurance in those states. Here is how he first expressed this concern:
A moment later, he reiterated the theme:
His reference to “interpretation” points to a longstanding principle of statutory interpretation: If a statute is susceptible to more than one reasonable interpretation, then the Court should adopt the interpretation that avoids constitutional problems.
That is the “canon of constitutional avoidance”—it was the fulcrum of Chief Justice John Roberts’s opinion in the last ACA case, NFIB v. Sebelius, when Roberts interpreted the individual mandate to be a constitutional tax rather than an unconstitutional regulation. As Roberts summarized the doctrine, “the rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act.”
And in this case, the possible constitutional problem Kennedy has in mind is one of coercion: while the federal government can try to entice states to participate in federal programs, it cannot coerce them to participate. For example, as the Court held in the last Obamacare case, the federal government can offer states more money to expand Medicaid, but they cannot threaten to take away all of a state’s Medicaid funds for failing to expand its program.
(Kennedy highlighted at least one other problem with the government’s case: If the statute truly is ambiguous, then the Court can defer to the administration’s position only if the Court believes that Congress intended to delegate to the IRS the power to singlehandedly decide whether to grant subsidies to states without state exchanges. “But,” Kennedy noted, “it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars of subsidies involved here?” He was alluding to the “major questions” doctrine: the Court does not presume that Congress would delegate such important policy questions to agencies. Kennedy raised similar concerns in the Hobby Lobby case, when the administration argued that HHS should be allowed to singlehandedly decide which religious groups and others should be exempt from having to provide abortifacient contraceptive coverage to their employees. But Kennedy’s specific concerns were not expressly reflected in the Court’s ultimate decision against the administration.)
After today’s oral arguments, the administration’s proponents (and many of its critics) seemed to glean from Kennedy’s federalism questions that these concerns may persuade Kennedy to “avoid” the constitutional problem by interpreting the ACA to allow the subsidies for all states, even states that didn’t establish exchanges. Maybe that is what Kennedy will decide.
But here is another possibility: Kennedy may conclude that the text clearly limits the subsidies to state-established exchanges; that the federalism concerns he raised don’t justify the Court in rewriting the clear statutory text; and that therefore those federalism concerns should be left for a future lawsuit, in which those who cry “coercion,” either individuals or states, challenge the constitutionality of the ACA’s exchange provisions.
Kennedy’s questions are no less consistent with that outcome. First, he conceded that if the petitioners are correct as to the meaning of the ACA’s subsidy provision, then “there’s nothing we can do” to change the meaning of the statute. (Scalia certainly pressed that point, too.)
Second, Kennedy stressed that the constitutional “coercion” problem was something that should worry both the petitioners and the government: “I think the Court and the counsel for both sides should confront the proposition that your argument raises a serious constitutional question.” He certainly was confronting the petitioners with the point. But what was he trying to confront the government with? Perhaps he was hinting to them what he was stressing in the last Obamacare case, NFIB v. Sebelius: that Obamacare’s constitutional problem lies not in how best to interpret the statute, but in the statute itself.
Let me reiterate, I am not saying that this is how Kennedy will certainly vote, against the administration. Oral arguments are notoriously bad indicators of ultimate positions. And he may not yet have made up his mind. Perhaps he will conclude that the statutory language is broad enough to encompass either side’s interpretation, and that in that case the constitutional problem is not merely “in the background of how we interpret this how we interpret this statute,” but ultimately in the foreground of that interpretation, convincing Kennedy and four other justices to rule for the administration.
But perhaps he will conclude that some constitutional problems can’t be interpreted away. As Kennedy himself (with Scalia, Thomas, and Alito) wrote against the Chief Justice in NFIB v. Sebelius, “to say that the Individual Mandate merely imposes a tax is not to interpret the statute but to rewrite it.” Indeed, Kennedy and the others emphasized in that case, that such an “interpretation” of unambiguous statutory text is not “judicial modesty,” but “a vast judicial overreaching.” Is that how he will feel about “an Exchange established by the State”?
Ultimately, Kennedy will have to decide for himself how clear the statute is, and whether to rule in favor of the administration is to “interpret” the statute or to “rewrite it.” But the mere fact that Kennedy sees federalism problems in the operation of the Affordable Care Act does not itself mean that he thinks those problems can be solved through interpretation. He certainly didn’t interpret constitutional problems away last time.
Adam J. White is an adjunct fellow at the Manhattan Institute, and counsel for Boyden Gray & Associates, which filed an amicus brief on behalf of the Galen Institute and State Legislators challenging the Administration’s policy. The views expressed here are his alone, and not intended to reflect those of the firm, its clients, or the Manhattan Institute.
