On March 4, 2015, the Supreme Court will hear oral arguments in King v. Burwell. That suit was filed by opponents of the Affordable Care Act (ACA) to stop tax-credit premium subsidies from being provided to moderate-income people in 34 states where the federal government is running health insurance exchanges in lieu of the states. According to the Urban Institute, it could result in the withdrawal of such subsidies for 9.3 million moderate-income people by 2016, and, according to the Rand Corporation, enrollment in coverage could drop by 9.6 million.

Some believe the King lawsuit is a contest between, on the one hand, congressional intent that premium subsidies should be provided in all states, versus, on the other hand, statutory language that says the opposite. Those who believe this formulation are half right: they are correct that Congress clearly intended subsidies to be provided to moderate-income families irrespective of whether their state of residence chose to run its marketplace directly instead of leaving it to the federal government; however, they are mistaken about the ACA’s language, which equally clearly indicates that subsidies should be provided in all states.

Statutory Interpretation: Taking Justice Scalia And The Other NFIB Dissenters Seriously

One of the axioms of statutory interpretation, expressed strongly and repeatedly by the nine Justices, especially Justice Scalia, ‎is that one looks at the whole statute and its context to review meaning, rather than adopting a blinkered focus on a few words. In interpreting a statute, courts must choose a textually permissible reading that furthers the evident purpose of the law over one that obstructs the statutory purpose. In doing so, as Justice Scalia expressly stated in one of his treatises, the well-worn canon of construction "follows from the facts that (1) interpretation always depends on context, (2) context always includes evident purpose, and (3) evident purpose always includes effectiveness." Applying that test to the statute as a whole as well as numerous explicit parts shows that premium subsidies were not conditioned in the statute by a state's willingness to run an exchange directly.

I will illustrate in a moment why different parts of the text clearly indicate that subsidies should be available irrespective of whether a state runs an exchange directly or whether, by default, the federal government does so instead, But, before doing so, it is worth reading what Scalia and three colleagues (Alito, Thomas, and Kennedy) explicitly‎ stated, bearing on the "evident purpose" test, in their dissenting opinion in NFIB v. Sebelius – the lawsuit challenging the ACA's constitutionality.

In their dissent, the four ‎Justices explained that premium subsidies are critical to meet the evident purpose of the ACA: "Without the federal subsidies, individuals would lose the main incentive to purchase insurance inside the exchanges," and insurers would likely "be unwilling to offer insurance inside of exchanges" if such subsidies did not exist. "With fewer buyers and even fewer sellers, the exchanges would not operate as Congress intended and may not operate at all." The four Justices certainly and explicitly understood the statute's "evident purpose" and how premium subsidies are central to that.

Reading The Whole Of The Affordable Care Act

But there is so much more in the ACA that demonstrates the absurdity of interpreting the statute ‎as denying subsidies in states using the Federally Facilitated Exchange (FFE). Borrowing from the excellent brief submitted by the Solicitor General as well as various friend-of-the-court briefs (such as the one filed by Families USA), consider the following:

The statute requires, as the plaintiff-petitioners concede, that federally facilitated exchanges must report information to the Treasury Department for the express purpose of administering the tax-credit premium subsidies. Such information includes the "amount of any advance payment" of subsidies; information "necessary to determine eligibility for, and the amount of, [the] credit"; and "[i]nformation to determine whether a taxpayer has received excess advance payments." These statutory reporting requirements would be pointless if tax-credit premium subsidies were not really supposed to be available through those federally facilitated exchanges.

The statute clearly indicates that subsidies "shall" be provided to people based on their income status (100-400 percent of the federal poverty line) without reference to place of residence. The petitioners' emphasized magic words—an "Exchange established by the state"—is found in another subsection describing the amount of the subsidies. It certainly would be an absurd reading to assume that low-income people "shall" receive the subsidies, but they will always be zero in the FFE states.

Under the statute, the only people who can purchase insurance ‎on an exchange are "qualified individuals." But again, if one applies the petitioners' magic words to the meaning of an exchange, there could never be qualified individuals in the FFE states. The same applies to "qualified health plans." Under the petitioners' blinkered definition, therefore, there are neither buyers nor sellers in the FFE states.

The statute requires the HHS Secretary to establish a system allowing residents of "each State" to apply for subsidies. It would be anomalous for moderate-income people in FFE states to have a statutory right to apply for subsidies if ‎that right would always result in their being turned down.

Pursuant to the ACA, all exchanges must provide information about tax-credit premium subsidies and assist individuals in applying for them, including ‎by making available a calculator to allow individuals to determine the cost of insurance "after the application of any premium tax credit." How could that make statutory sense if the tax credit is always zero in FFE states?

Other such absurdities abound if one reads the various statutory sections. Clearly, however, a reading of the ACA in its entirety makes clear that there is no intended difference in the operation of exchanges, whether directly run by the state or operated by the federal government for a state.

Note two other key matters that flow from the statute. First, it is worth examining the titles throughout the statute (with emphasis added through capitalization):

Title I of the Act bears the heading "Quality, Affordable Care for ALL AMERICANS."

Subtitle A is headed, "Immediate Improvements in Health Care Coverage for ALL AMERICANS."

Subtitle C is labeled "Quality Health ‎Insurance Coverage for ALL AMERICANS."

Subtitle D is "Available Coverage Choices for ALL AMERICANS."

Subtitle E, which contains the provision here regarding subsidies, is labeled "Affordable Coverage Choices for ALL AMERICANS."

And Title X is headed "Strengthening Quality Affordable Health Care for ALL AMERICANS."

As the four NFIB dissenters stated, the ACA provided for federally facilitated exchanges because "Congress thought that some States might decline. . . to participate in the operation of an exchange." Nonetheless, Congress clearly indicated that it was making affordable coverage available "for all Americans" – an obvious indication that the statute provided the help needed to truly make health affordable coverage available to Americans in all states.

The States’ Understandings Contradict The Plaintiffs’ Argument

Perhaps even more significantly, it is worthwhile to contemplate plaintiff-petitioners' very creative but erroneous ‎assertion about statutory conditionality – i.e., that Congress sought to induce states to set up their own exchanges by denying subsidies to its residents if they failed to do so. This, quite obviously, would be conditionality with enormous consequences. But, if such significant conditionality truly existed, it would have been clearly communicated to the states – and it certainly was not. Nowhere in the statute is such important alleged conditionality expressed.

If one reads the friend-of-the-court brief by almost half (22) the states, the absence of such communication is manifestly clear. Six of the state signatories to the friend-of-the-court brief—Maine, Mississippi, North Carolina, North Dakota, Pennsylvania, and Virginia—elected to forgo establishing their own marketplaces. Four others—Delaware, Illinois, Iowa, and New Hampshire—have FFEs through a "partnership model." ‎The friend-of-the-court brief is replete with quotes, often from Republican governors, that they expected no harmful ramifications to their citizens if they delegated exchange operations to the federal government.

For example, when Virginia rejected direct administration of its exchange, Governor Robert F. McDonnell’s correspondence with Health and Human Services Secretary Kathleen Sebelius explicitly emphasized that the state was unaware of any “clear benefits of a state run exchange to our citizens.” Similarly, when New Hampshire decided to leave exchange implementation to the federal government, its legislation created an advisory board whose members must include a person “who can reasonably be expected to purchase individual coverage through the exchange with the assistance of a premium tax credit.” (emphasis added) In Nebraska, when Governor Dave Heineman rejected running the exchange directly, he explained that on “the key issues, there is no real operational difference between a federal exchange and a state exchange.”

Many similar, explicit comments were made by other governors when they decided whether or not to run exchanges directly or to delegate its administration to the federal government. Clearly, the conditionality posited by the plaintiff-petitioners never reached the gubernatorial decision-makers about whether to run their own exchanges.

The sum and substance of all this is that the controversy is not one of Congressional intent versus statutory language. Both intent and the statute make clear that there should not be a denial of tax-credit premium subsidies in the FFE states.