The fate of Obamacare might hinge on the Supreme Court’s interpretation of just one word: “such.”
Perhaps never before has so much been asked of “such.” It is a key part of the Obama administration’s argument urging the high court not to invalidate the Affordable Care Act’s insurance subsidies in most of the country.
The Justice Department hauled out Black’s Law Dictionary to make sure the justices are aware that, in legalese, “such” means “that or those having just been mentioned.” Once you understand that, the government and its allies argue, there’s really no way to rule against the Obama administration.
Their argument is not trivial. It will be surprising if the justices get through next month’s oral arguments without spending at least a few minutes on the Affordable Care Act’s use of “such.” The challengers in the case, though, feel that the four-letter pronoun might be getting too much attention.
“The word ‘such’ cannot bear this weight,” the challengers wrote in their brief to the high court.
The challengers have a whole phrase they want the court to focus on instead: “established by the state.” Which the Affordable Care Act does not define — because of course it doesn’t — that might provide clarity and avoid controversy, and this is Obamacare we’re talking about.
Unlike the landmark 2012 case over the law’s individual mandate, the latest challenge — the lawsuit over the way the IRS is providing Obamacare’s premium subsidies — isn’t a constitutional issue. It’s a matter of statutory interpretation — asking the Court to decide what the law says and whether the administration has implemented it accordingly.
Such cases involve a lot of parsing and hair-splitting, by definition. But in King v. Burwell, the stakes are enormous: Millions of people would likely lose their health insurance if the Court rules against the administration, and insurance markets in 34 states could spin out of control as premiums increase for everyone. Obamacare would not be struck down entirely — that might be simpler, actually — but it could become unworkable in most states, while humming along fine in others.
There’s a lot more at play in this case than semantics. Arguments about the purpose of the law, and the legislative history, will weigh on the Court’s deliberations. But the justices, particularly conservatives like Chief Justice John Roberts, will start with the text.
And to understand how the Court will reach its ultimate decision, you have to get way down in the weeds. You have to think hard about “such,” and “established,” and the specific ways the statute uses them.
Step 1: The Law Directs States To Set Up Exchanges
Congress wanted each state to set up and run its own exchange — the new marketplaces where consumers can shop for health insurance.
So, in section 1311 of the Affordable Care Act, Congress wrote that “each State shall … establish an American Health Benefit Exchange … for the State.” The same section spells out what the exchange has to do to be certified as an exchange — sell insurance, have a website, run a program to help people compare their options, etc. And, it says, “an Exchange shall be a governmental agency or nonprofit entity that is established by a State.”
Step 2: The Law Authorizes Backup Exchanges
Although the law said states “shall” establish exchanges, it also set up a backup plan: If a state did not “elect” to establish its own exchange, the statute says, the Health and Human Services Department “shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State.”
There it is: such Exchange.
To the Justice Department and other Obamacare supporters, “such Exchange” is a critical phrase. It shows, they argue, that Congress saw the federally run exchanges as essentially identical, in their purpose and their responsibilities, to state-run exchanges.
“‘Such’ is an important clue — perhaps the most important clue in the statutory text — about what Congress meant the backup exchanges to do. And the statutory text is quite clear that the federal government was stepping into the states’ shoes,” said Nicholas Bagley, a University of Michigan law professor and an expert on the subsidies case.
Step 3: The Law Authorizes Subsidies
In an effort to get people into the system and make health insurance affordable, the law provides subsidies to low-income families to help cover part of the cost of their premiums.
The size of your subsidy, the law says, is based on each month that you were enrolled in coverage “through an Exchange established by the State under [section] 1311 of the Patient Protection and Affordable Care Act.”
This line is the heart of the challengers’ argument. As they see it, if you weren’t enrolled in an exchange “established by the State,” your coverage doesn’t meet the formula’s definitions and you shouldn’t be receiving a subsidy. Thus, the IRS is breaking the law by providing subsidies in all 50 states.
“Precisely because the Act directs two distinct entities to establish Exchanges, ‘Exchange established by the State’ cannot be read to include an Exchange established by HHS,” the challengers wrote in their brief to the Supreme Court.
Step 4: Are All Exchanges Equal?
The central debate in this case is, somehow, simultaneously very nitpicky and weirdly meta. It’s largely a debate about whether state and federal exchanges are the same thing.
The challengers point to “established by the State” to draw a distinction between state and federal exchanges. The government calls that phrase a “term of art” and points to the “such Exchange” language to argue that there is no real distinction: An exchange is an exchange.
The Justice Department also points to the law’s definition of an exchange. There is only one: “The term ‘Exchange’ means an American Health Benefit Exchange established under section 1311 of this title.”
Section 1311 is the part that directs the states to set up exchanges, lays out the standards for what an exchange is, and says it has to be run by “a governmental agency or nonprofit entity that is established by a State.” It only mentions states. Federally run fallbacks are in a different section.
In other words, even if HHS did the work of establishing an exchange, the law still appears to say it was established under the section that tells states what to do — section 1311. Making this even more complicated, the same section is referenced in the challengers’ favorite line — the one saying subsidies are based on coverage “through an Exchange established by the State under section 1311.”
If section 1311 is about state exchanges, and all exchanges are defined as being created by section 1311, aren’t they all state exchanges? The government says yes — that’s what “such Exchange” means.
“The ‘such Exchange’ that the Secretary establishes (when the State does not) is properly treated as the “˜Exchange established by the State under section 1311.’ That is so because there is no other Exchange defined in the ACA that it could be,” Virginia said in a brief supporting the federal government.
Step 5: Text vs. Context
Jonathan Adler, a law professor at Case Western University who has helped shepherd the case against Obamacare’s subsidies, says “such exchange” is one of the government’s strongest arguments — but that the government can’t win on that alone.
“You don’t need to reject their argument about ‘such’ to also say they have problems with ‘established by the State,’” he said.
Even if a federal fallback exchange is essentially the same as a state exchange, the subsidies language refers specifically to who “established” the exchange, he said.
“The term ‘such’ creates an equivalence between the two types of Exchanges ‘in terms of what they are,’ but subsidies turn on another attribute of Exchanges — ‘who established them,’” the challengers said, quoting from a lower court’s decision.
This is why, in a case that asks what the statute says as well as what it means, both sides feel they have the text on their side. If the exchanges aren’t supposed to be the same, what’s with “such Exchange”? And if they’re supposed to be the same, why include “established by the State”?
“What you’re trying to do is make sense of the statute as a whole,” Bagley said. “The question is what did Congress mean — what message did it mean to communicate?”