The King case turns on whether the ACA's language allows federal premium tax credit subsidies in all states or only those states that “established” their own exchanges. If the justices invalidate subsidies in states using the federal exchange, millions of Americans likely would drop their coverage because they would not be able to afford it, and insurance markets in those states might go into a death spiral. A ruling is expected in June.
It was clear from the beginning that the four liberal-leaning justices—Ruth Bader Ginsburg, Elena Kagan, Stephen Breyer and Sonia Sotomayor—were on the government's side from the thrust of their questions for Carvin.
He argued that the case is one of “straightforward” statutory construction. A part of the law that says subsidies are available to Americans who enrolled through “an exchange established by the state” speaks for itself, he said.
Kagan responded that it's important to consider the law's structure and context, not only those few words. Breyer commented on another section of the law that states the HHS secretary shall “establish and operate such exchange within the state,” saying that phrase paired with another phrase seemed to indicate that the law envisioned only one type of exchange.
Later, conservative Justices Antonin Scalia and Samuel Alito fired critical questions at Verrilli. Justice Clarence Thomas characteristically remained silent, sometimes leaning back in his chair with his eyes closed.
Scalia said it's “gobbledygook” to say that the phrase “establish and operate such exchange within the state” indicates the federal government can establish a state exchange. Alito hinted that the justices might consider staying a ruling against the subsidies until the end of 2015 to give Congress and the states time to mitigate any potential fallout, though such a delay would be highly unusual.
“You could speculate that was an effort by Justice Alito to bring on board a few wavering justices,” said Thomas Miller, a resident fellow at the conservative American Enterprise Institute, which favors eliminating the subsidies.
Scalia added that he was confident Congress would take action to minimize “disastrous consequences” if the subsidies were struck down. Verrilli drew laughs when he responded: “This Congress, your honor?”
Scalia's and Alito's comments signal possible negotiating points in coming months, said Ankur Goel, a health partner with McDermott Will & Emery who co-authored an amicus brief in the case for the American Public Health Association, siding with the government. He predicted that the justices who want to invalidate the subsidies will argue that such a ruling would not necessarily lead to an insurance market death spiral.
Everyone in the courtroom closely watched Chief Justice John Roberts. He was the swing vote in upholding the ACA's constitutionality in 2012, giving healthcare industry stakeholders hope that he might swing the same way this time.
But Roberts offered few clues, remaining mostly silent as arguments swirled around him. Veteran court watchers said he usually participates much more actively.
“To me that says that he's very cognizant that this is one of those cases that will define the tenor of his court and his legacy,” said Andrew Shin, healthcare policy director at the government consulting firm ML Strategies. Shin said Roberts likely was trying to demonstrate that he didn't come in with an agenda.
But Roberts made brief comments at the end that became the subject of intense speculation. He asked Verrilli to clarify whether the government thought the court, if it found the ACA's language ambiguous, should defer to the Internal Revenue Service's interpretation that the subsidies should be available in all states.
“If you're right,” he asked Verrilli, “that would indicate that a subsequent administration could change that interpretation?”
Tim Jost, a law professor at Washington and Lee University and supporter of the law, said Roberts' comment suggests he may be willing to follow the 4th U.S. Circuit Court of Appeals panel ruling in the case. That court found the law's language ambiguous and upheld the subsidies under the Supreme Court's longstanding Chevron doctrine of deferring to federal agencies' interpretations when a law is ambiguous.
Some observers thought that question suggested Roberts might choose this approach in deciding the case because it would let a subsequent Republican administration change the IRS rule and eliminate the subsidies.
Larry Vernaglia, chairman of the healthcare practice at Foley & Lardner, which filed an amicus brief on behalf of Trinity Health siding with the government, said that applying the Chevron doctrine would save the subsidies for now. But he said it “also would be an unfortunate outcome if the court wants finality, which it appears they do.”
However, Kennedy expressed skepticism about applying the Chevron doctrine and deferring to the IRS' interpretation about the availability of subsidies in all states. It seemed like “a drastic step,” he said, to give the IRS discretion considering the billions of dollars involved.
With that comment, Kennedy tempered the excitement ACA supporters felt about his earlier constitutional concerns regarding the challengers' case. It was a reminder that betting on Supreme Court rulings based on oral arguments is often a bad gamble.