Supreme Court closely divided on Obamacare's future

Richard Wolf and Brad Heath | USA TODAY

Show Caption Hide Caption Supreme Court remains divided over health care law USA TODAY's Jayne O'Donnell reports as the Supreme Court appeared closely divided Wednesday during heated arguments over President Obama's health care law, but questions from Justice Anthony Kennedy gave proponents hope the statute will be upheld.

WASHINGTON — The Supreme Court appeared closely divided Wednesday during heated arguments over President Obama's health care law, but questions from Justice Anthony Kennedy gave proponents hope the statute will be upheld.

At least four justices appeared skeptical about a challenge to the law that could eliminate tax credits used by millions of Americans to pay insurance premiums. That could leave 34 states with unmanageable insurance markets featuring rising premiums and millions more residents uninsured.

The principal argument advanced by the law's opponents — that four words in the 906-page statute permit the use of tax credits only in states that set up their own health insurance exchanges — appeared to please the court's most conservative members.

On the other hand, all four liberals sided with the government's assertion that the entire law — designed to provide health insurance protection to "all Americans" — must be considered paramount to any literal interpretation of those four words.

Kennedy, who could be the decisive vote, acknowledged a rigid reading of the law seemed to bolster opponents' argument that tax credits can flow only to 16 states operating their own health insurance exchanges. But if that's the case, he said, the law might be unconstitutionally coercive.

"Perhaps you will prevail in the plain words of the statute," Kennedy said. But he added, "There's a serious constitutional problem if we adopt your argument."

Later in the day, Kennedy suggested the law may be ambiguous enough to give the Internal Revenue Service deference for its regulation allowing tax credits in federal health exchanges. But he said granting the IRS such leeway would be a "drastic step," because billions of dollars are at stake.



The court challenge in King v. Burwell represents the most serious obstacle to the law since 2012 — more serious than its occasionally balky website, wavering public opinion ratings or Republican opposition in Congress.

The law states that tax credits will be available through so-called exchanges, or online marketplaces, "established by the State." When it was being crafted, lawmakers assumed most or all states would create their own exchanges. After it passed in March 2010, it became clear that many states would rely on the federal government to operate them, as the law allows.

In 2012, the Internal Revenue Service issued regulations making the subsidies available in all states. The law's challengers claimed they cannot be offered in exchanges operated by the federal government. At least 34 states fit into that category. Without subsidies, insurance costs would skyrocket.

To back up their claim that Congress meant what it said — that it wasn't simply a drafting error — the law's opponents say lawmakers purposely made tax credits available only in state-run exchanges as an incentive for governors and legislatures to create their own exchanges.

But proponents, backed by 22 states, have argued that governors and legislatures never were told they needed to set up state exchanges in order for their citizens to get tax credits. They claimed the issue was not discussed when the law was being drafted. And now, they said, the court should take into consideration that millions of people would be hurt if the subsidies are eliminated.

That threat commanded center stage during much of Wednesday's debate. And it appeared to leave the law in the hands of two hard-to-read justices: Kennedy and Chief Justice John Roberts, who wrote the 5-4 decision upholding the Affordable Care Act three years ago.

Michael Carvin, the lawyer for the challengers, pronounced himself "hopeful and confident" after the session, which stretched for 80 minutes rather than the customary hour. But Neal Katyal, a former acting solicitor general who sat beside former Health and Human Services secretary Kathleen Sebelius, said the argument "heavily indicated that the court is likely to rule for the government."

The packed courtroom included more than a dozen top members of Congress from both parties, including Senate President Pro Tem Orrin Hatch, Senate Minority Whip Dick Durbin, House Majority Leader Kevin McCarthy and House Minority Leader Nancy Pelosi, The current HHS secretary, Sylvia Mathews Burwell, sat front and center in the spectators' section.

Roberts maintained an unusual silence throughout most of the debate. He piped in just twice, both times on issues that could lead to a more narrow decision.

When liberals questioned whether any of four plaintiffs actually suffered an injury that would allow them to bring the lawsuit, he noted that the government had not raised the issue beforehand. And when some justices suggested the government should win based on the law's ambiguity, he noted a future administration could change direction.

In combative terms, the court's four more liberal justices argued that limiting tax credits used by millions of Americans to pay insurance premiums, as the challengers said the law requires, would throw the insurance markets in 34 states into a "death spiral."

"We're going to have the death spiral that this system was created to avoid," Justice Sonia Sotomayor said. "Tell me how that is not coercive in an unconstitutional way."

During the second half of the oral argument, Justices Antonin Scalia and Samuel Alito said the law clearly does not include tax credits in federal exchanges — and that if the court rules that way, states or Congress can step in and fix it.

"How can the federal government establish a state exchange?" Scalia said. "That is gobbledygook."

The lawyer for the challengers, Michael Carvin, returned repeatedly to the wording of the law itself. "This is a straightforward case of statutory construction, where the plain language of the statute dictates the result," he said.

The liberals' line of attack reached back to 2012. Then, the court's conservatives said that the Constitution did not permit the federal government to strip a state of all of its Medicaid funding as a consequence of not expanding eligibility for the program.

During the second half of the argument, Solicitor General Donald Verrilli — who successfully defended the health care law in 2012 — argued that it would make no sense if essential tax credits were excluded from two-thirds of the states, as the challengers suggest was either Congress' intent or error.

"Their reading produces an incoherent statute that doesn't work," Verrilli said. "That cannot be the statute that Congress intended."

To which Scalia replied: "It nonetheless means what it says."

He and Alito also asked why the states or Congress couldn't fix what the court breaks if it rules that 34 states should not be offering tax credits. Alito said "it's not too late" for the states to set up exchanges, while Scalia intoned, "What about Congress?"

"You really think Congress is just going to sit there while all of these disastrous consequences ensue?" Scalia said. That brought knowing smiles and chuckles from the lawmakers seated adjacent to the news media section.

At the White House, press secretary Josh Earnest said the president was briefed by his counsel, Neil Eggleston, who came away from the courtroom happy with what he heard.

"The administration was quite pleased with the performance of the solicitor general in making a strong case to the court about the constitutionality of the law," Earnest said. "We also feel like the session was useful, because it gave him an opportunity to illustrate how clearly the law reads and how strong our legal arguments are in the case."

The argument over subsidies in federal exchanges is the focus of four separate cases. In King, the U.S. Court of Appeals for the 4th Circuit unanimously upheld the law. A panel of the D.C. Circuit appeals court ruled 2-1 for the challengers, but that opinion was vacated by the full court pending further review, which is on hold. A district court in Oklahoma ruled in favor of the challengers. A fourth case is pending in Indiana.

The legal argument in favor of the law has been bolstered by the potential effect of its demise. More than 9 million people could lose subsidies in 2016, according to data compiled by the liberal Urban Institute and Robert Wood Johnson Foundation. On average, those subsidies pay more than 75% of premium costs.

Without subsidies, more than 8 million people would be exempt from the requirement that individuals purchase insurance, because it no longer would be affordable. Hundreds of thousands of employers would be exempt from penalties for not covering employees, because the penalties only kick in if any of their workers require federal subsidies.

Those are the results most opponents seek. But the four King plaintiffs' qualifications to bring the lawsuit were cast in doubt because of their low incomes and potential eligibility for other government benefits. As the case went to court, it was not clear whether any of them would be worse off under the law.

Other parts of the Affordable Care Act would be left standing even if the justices strike down tax credits in federal exchanges. Participants in at least 14 states that operate their own exchanges would remain eligible for tax credits: California, Colorado, Connecticut, Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New York, Oregon, Rhode Island, Vermont and Washington. Two other states, Idaho and New Mexico, are transitioning from the federal to state exchanges.

But the law no longer could work as intended. Federal subsidies make insurance for most participants affordable. That keeps them from being exempt from the individual mandate. If they drop insurance and don't pay the penalty, insurance companies no longer could afford to guarantee coverage to everyone else, and hospitals no longer could afford to treat the uninsured.

"I have never seen anything like this, where it's if you take what the statute says you can have ... then you get these disastrous consequences," Justice Ruth Bader Ginsburg said.

Contributing: David Jackson in Washington