We’ve simplified King V Burwell, the ObamaCare subsidy lawsuit. We explain the Supreme Court case, its history, ideology, and outcome in simple terms.
King V Burwell Summary
King V Burwell was a lawsuit heard by the Supreme Court in 2015. It challenged the legality of subsidies issued by the IRS on behalf of states that used the federal health insurance exchange HealthCare.Gov (and thus did not set up their own exchange).
The challenge hinged on the meaning of four words in the Affordable Care Act, “established by the State”. These four words referred to a part of the law that said “exchanges established by the State” could issue subsidies, but didn’t mention states that didn’t establish their own exchange.
Later in a federal register the IRS clarified that this section gave them the power to issue subsidies whether or not a state had created it’s own exchange or defaulted to the federal exchange. The lawsuit contested that the law should be interpreted as written (stopping subsidies from being issued for those that use the federal exchange) and that the IRS did not have the power to make this clarification.
King V Burwell Ruling
The Supreme Court ruled against the plaintiff in King V Burwell on June 25th, 2015 declaring subsidies legal. You can read more about the King V Burwell ruling here.
The Subsidy Lawsuits
Aside from King V Burwell there have been a number of challenges to the Affordable Care Act, many revolving around subsidies or the other key part of the ACA the mandate to buy insurance:
- King V Burwell is one of a few lawsuits that challenged the legal standing of subsidies issued by the IRS in state’s that use HealthCare.Gov.
- Other related lawsuits are Halbig v. Burwell, Pruitt v. Burwell, and to some extent Indiana v. IRS.
- King along with the other Plaintiffs, were picked by Libertarian and Conservative groups in order to take on the laws main source of federal spending: subsidies.
- The last case NFIB V Sebelius focused on Medicaid expansion and the mandate (the other two sources of spending and taxation).
- Burwell is the current HHS secretary who replaced Sebelius, the case was orginally “V Sebelius”.
If you want the details on each lawsuit, check out our ACA lawsuits page.
What Was at Stake in King V Burwell?
There are three main parts that make the Affordable Care Act work subsidies, a mandate to get insurance, and the ban on pre-existing conditions. If any of these three “legs” is taken away the law collapses. Given this the whole law was at stake in this lawsuit, also:
- Somewhere between 5 million and 8.2 million Americans who use HealthCare.Gov could have lost their subsidies.
- Depending on how the Supreme Court ruled, it could have opened the door repealing the whole law or breaking the laws ability to function correctly.
- Also depending upon the ruling, it could have opened the door for regulatory agencies, Congress, and future lawsuits to have more freedom in interpreting laws with vague wording.
The Issue Raised By King V Burwell
King V Burwell is based on four things: 3 sections of the PPACA and 1 IRS clarification. (Go ahead and open up the PPACA and find the sections for yourself now using the find command on your keyboard):
- Section 1311 of the Affordable Care Act which says, “An Exchange shall be a governmental agency or nonprofit entity that is established by a State.”
- Section 1321 of the ACA which says, “a State law or regulation that the Secretary determines implements the standards within the State.” And if a State fails to set up an exchange, “the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.”
- Section 1401 of the ACA which says, “the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act”
- Since the above three sections in question have no mention specifically of subsidies in federally established exchanges the IRS clarified this by issuing this “final rule” in Federal Register / Vol. 77, No. 100 / Wednesday, May 23, 2012 / Rules and Regulations 30377. It says, “Federally-Facilitated Exchange. Under the proposed regulations, the term Exchange has the same meaning as in 45 CFR 155.20, which provides that the term Exchange refers to a State Exchange, regional Exchange, subsidiary Exchange, and Federally-facilitated Exchange. Commentators disagreed on whether the language in section 36B(b)(2)(A) limits the availability of the premium tax credit only to taxpayers who enroll in qualified health plans on State Exchanges. The statutory language of section 36B and other provisions of the Affordable Care Act support the interpretation that credits are available to taxpayers who obtain coverage through a State Exchange, regional Exchange, subsidiary Exchange, and the Federally-facilitated Exchange. Moreover, the relevant legislative history does not demonstrate that Congress intended to limit the premium tax credit to State Exchanges. Accordingly, the final regulations maintain the rule in the proposed regulations because it is consistent with the language, purpose, and structure of section 36B and the Affordable Care Act as a whole.”
King V Burwell and the Supreme Court Case
The Supreme Court heard oral arguments for King V Burwell on March 4th, 2015. Get a transcript of the oral arguments here.
- The Plaintiffs were represented by Michael Carvin of law firm Jones Day. He argued part of the Supreme Court health care case in 2012 and on behalf of George W. Bush in the 2000 election Florida recount controversy.
- Representing the government was Solicitor General Donald Verrilli, who also argued the Supreme Court case in 2012.
- Justices Breyer, Ginsburg, Sotomayor, and Kagan are expected to rule in favor of the Affordable Care Act.
- Justices Scalia, Thomas, and Alito are expected to rule against the Affordable Care Act.
- It was not known how Chief Justice Roberts and Justice Kennedy would rule.
- Justice Roberts upheld the ACA in the last Supreme Court lawsuit over the ACA NFIB V. Sebelius saying (we are paraphrasing), “If the people want a law that hurts them, that is their choice. It’s Congress’s job to pass legislation, it’s our job to see if it’s legal”.
- Justice Kennedy says he sees “a serious constitutional problem” in the idea Congress would force states to set up exchanges or risk their residents losing tax credits.
- Important bullet points also include Mentions of: 1) The “Federalist Argument” and 2) The “Chevron Defense”
- The take-away from the blog-o-sphere in our opinion is: The Court sides with the ACA. We don’t see another repeal subsidies case while President Obama is in office, however the ruling leaves the door open for repeal if we get a Republican President in 2016.
King V Burwell the CATO Arguments
The CATO institute is a smart Libertarian think tank that, unlike some of their right-leaning counterparts, (usually) supports their ideology with cold hard facts. Thus we will use their general ideology and opinions expressed on CATO.org to summarize their views.
- Generally, less government intervention is best. Regulations, taxes, subsidies, and federal spending hamper individual liberty. A lightly regulated free-market solution is always better than a solution that gives powers to regulatory agency like the IRS.
- Specifically, they claim, the law was written to pressure states into setting up exchanges and issuing subsidies. When it became clear that states would reject exchanges, the IRS and the parts of government dealing with the ACA back-stepped and tried to say the intention was for the IRS to issue subsidies to those using federal exchanges too. They think the wording clearly shows this was not the case.
Opinion: This video above from American Enterprise Institute shows footage from 2010 in which smart conservatives discuss the wording of the law as it pertains to subsidies. This same line of thinking would continue to be explored by conservative groups and made its way to both NFIB V Sebelius and King V Burwell. In other words, many Conservative and Libertarian think tanks and groups have had an organized strategy to strike at the laws weak points since day one. Also, this 2011 ALEC guide to state’s repealing ObamaCare doesn’t hurt our case in claiming that there is an organized force with interest in going after the ACA through legal battles.
King V Burwell the Government Arguments
Since in this case we arguably have Conservative Libertarian ideology taking the Government to court, we won’t default to smart and centered rags like the Wall Street Journal, Forbes, or New York Times for counterpoints and instead will focus on arguments from the Government expressed in the King V Burwell hearing and general ideology of ACA supporters.
- Generally, government intervention is necessary. Regulations, rules, taxes, subsidies, and federal agencies ensure a fair and even playing field, and that is where America is at it’s best. By giving the Fed power, we ensure our economy, by giving the IRS power, we ensure our taxation system functions smart and fair, etc.
- Specifically, they claim, only a very narrow reading of the law would leave one with the opinion that subsidies only applied to state exchanges. If the Plaintiffs are right, this would mean that the law was drafted with the intention of excluding states.
Opinion: One could argue the ACA was strong enough to stand on it’s own without vague wording on it’s subsidies and tax (individual mandate). The opposition caught the vagueness and went for the throat. If anything this whole thing is proving 1) People want reform and regulation that laws like the PPACA provide 2) Playing politics with the wording of laws is dangerous, and it isn’t worth the few extra points gained in the political sphere. The vagueness may not have been intentional, and Congress should have caught it before the law was passed, but in hindsight we can see the error and the damage it’s done.
Opinion: The Ones Who are Just Trying to Provide Health Insurance to Their Families Argument
Not everyone works at CATO or the IRS, and not all of us want some radical ideological or political outcome… Some normal people are just trying to ensure quality health care for their families. Here is that ideology:
- Generally, make it work, keep it fair, and stop fighting ideological and political wars over our health care and health insurance.
- Thank you for the financial help, the process is awful confusing and taxes are never fun, but taking it all away now isn’t going to help that. Can we perhaps, focus on making healthcare reform better? Like how about those deductibles and the coverage gaps that still lead to unpaid hospital bills. How about those millions who will never sign up despite all of this. What about claims, billing, litigation, what about access to care in rural communities, etc.
Opinion: We ourselves are small business owners. We don’t benefit directly from cost assistance, rather we pay most of the new higher taxes on individuals. However, our families and the people who comment on ObamaCareFacts.com every day do benefit from Medicaid and the Marketplace. That is enough for us to stand behind keeping the law intact. The truth is, spending and taxation aside, the bulk of this law is important patient protections and reforms to Medicare and the healthcare industry. We can’t ignore the positive impact that may have on our general quality of life and the economy. If the spending and revenue provisions have to be addressed, let them be addressed in Congress through the proper channels. Giving the law its day in court may be appropriate, but this isn’t a battle that should be won or lost on the interpretation of a few words in a thousand page law