The One Word That Could Save Obamacare

So much rides on what the Supreme Court thinks of “such.”

Feb. 8, 2015, 3 p.m.

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.

(RE­LATED: Why Obama­care Will Lose)

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.

(RE­LATED: Why Obama­care Will Win)

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?”

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