A False History: The Rewriting of the Affordable Care Act by the Challengers in King v. Burwell

by Eric Segall

On March 4, the Supreme Court will hear oral arguments in King v. Burwell, yet another challenge to the Affordable Care Act ("ACA"). This time around, the plaintiffs are claiming that the IRS acted illegally by providing federal subsidies on health insurance exchanges created by the Secretary of HHS because the ACA only authorizes such subsidies on an “exchange established by the state.” The government’s response (on the textual issue) is that a different section of the ACA provides that if the states do not create their own insurance exchanges, HHS will set up “such exchange.”

The government clearly has the better of the textual argument because under the well-established Chevron doctrine, if the law is ambiguous (and here it is), the agency’s interpretation only has to be reasonable. Much has been and will be written on that question but that debate is not the focus of this blog post.

Instead, I want to focus on the retelling of history by the architects of this lawsuit, Jonathan Adler, a law professor at Case Western Reserve, and Michael Cannon of the Cato Institute. It is not an overstatement to say that without the dedication of these two men to the destruction of the ACA, this lawsuit would never have gotten off the ground.

On social media, and in their amicus brief in the Supreme Court, Adler and Cannon support their textual interpretation of the ACA (that subsidies are not available on federal exchanges) with the assertion that Congress used its spending power to threaten the states with the withholding of the subsidies unless the states agreed to establish their own exchanges. This claim is repeated in a separate amicus brief submitted officially by the Cato institute, and in the brief for the plaintiffs. 

The claim that Congress intentionally and knowingly used its spending power to coerce states to create insurance exchanges by threatening to withhold subsidies is simply false.

There is not a single word in the entire law telling the states that, if they decide not to open their own exchange, they will lose federal subsidies. Moreover, no member of Congress nor any member of the Obama Administration ever communicated such a threat to the states once the law was passed.

The reason there is no evidence is that such an understanding would have been at the time, and is today, completely inconsistent with the commonly understood and fundamental assumptions underlying the ACA. If insurance companies must cover people with preexisting conditions, and if the government is going to force healthy people to buy insurance, then the government must also provide premium subsidies; otherwise there will be a “death spiral" of increased premiums for everyone. This structure represents the now iconic three-legged stool and is at the heart (and running through the blood) of the ACA.

Lawyers representing two non-profits in Missouri have also filed an amicus brief devoted in large part to the idea that numerous states knew that subsidies might not be allowed on federal exchanges when those states debated whether to create a state exchange. According to the brief, in light of that history, such a reading of the law is not unreasonable.

This argument is itself unreasonable and misleading because all of the evidence cited for that claim comes after Adler and Cannon publicized their mistaken interpretation of the statute. States came up with the crazy idea that subsidies might not be available on federal exchanges only after Adler and Cannon’s campaign started. None of that is relevant to what people understood the law meant when it was enacted in 2010. Back then, it was common knowledge that subsidies had to be available everywhere there was an ACA health insurance exchange.

The fact that some states debated creating exchanges in the context of possibly losing federal subsidies because Adler & Cannon convinced them that was a possibility does not come close to outweighing the evidence that no government official ever told the states that subsidies might not be available on federal exchanges, that such a threat is nowhere in the ACA, and that no one who wanted to see the law succeed would ever have given the states the tool to unilaterally destroy the law.

The amicus brief filed by a number of conservative Senators and Members of the House of Representatives also claims that the ACA was not meant to provide subsidies on federal exchanges but their brief does not point to one member of Congress who ever made that point during the debate on the law or afterward (at least not until the Adler/Cannon theory became public). That absence is understandable because no one thought that to be the case until well after the law was passed and this litigation was anticipated.

Proving a negative is difficult. But as of this moment, there is not a shred of evidence that, in 2010, when the law was passed, any member of Congress or the Administration believed federal subsidies would be unavailable on federal exchanges.  If anyone can demonstrate otherwise, then we can have the argument. So far, no one has come close. 

If the Supreme Court rules for the plaintiffs in this case, it is likely that over 8,000,000 people will lose their health insurance, that markets in those states could crumble, and serious physical and economic harm to people will result. The Court should not take such a drastic step on the basis of the self-fulfilling prophecies of two men who have relentlessly tried to kill the ACA. If you don’t believe me about their passion, just look at Cannon’s own Twitter handle: “The Man Who Could Bring Down ObamaCare…Obamacare's Single Most Relentless Antagonist… Anti-Universal Coverage Club founder.”

The lack of evidence to support the plaintiffs' theory (and its utter inconsistency with the entire concept of the three-legged stool) does not mean that the government must win. It just means that for the plaintiffs to prevail they must do so on the basis of the four corners of the statute. If law matters, they will lose there too but that is a topic for another day.