Predicting the Outcome of the Latest Challenge to the Affordable Care Act

By Joseph A. Garofolo

Since there have already been a number of thoughtful posts regarding the proposed ERISA fiduciary regulation that was issued by the Department of Labor on April 14, 2015, this blog strays from that subject to make a few observations about King v. Burwell—the latest challenge to the Patient Protection and Affordable Care Act (the “ACA”) pending before the Supreme Court.

King involves an interpretation of a section of the Internal Revenue Code (the “Code”) added by the ACA.  Code § 36B addresses the availability of premium tax credits for low to moderate income purchasers of insurance through health care exchanges established under the ACA.

Premium tax credits are made available for eligible taxpayers “enrolled through an Exchange established by the State under [section] 1311 [of the ACA].”  26 U.S.C. § 36B(b)(2)(A).  Exchanges under the ACA were to be established pursuant to one of three methods: i) by the state pursuant to ACA § 1311; ii) by the federal government and state partnering pursuant to ACA § 1321; and iii) by the federal government pursuant to ACA § 1321.  In 2012, the Internal Revenue Service (the “IRS”) promulgated a regulation that interpreted the relevant language of Code § 36B to include those “enrolled in one or more qualified health plans through an exchange,” meaning that the tax credits would be available to eligible taxpayers regardless of how an exchange was established in a particular state.  Thereafter, 34 states declined to establish exchanges and, as contemplated by the ACA, the Department of Health and Human Services set up exchanges in those states.

The question before the Supreme Court is whether the IRS’ interpretation is a permissible construction of Code § 36B.  An agency cannot interpret a statute contrary to the “unambiguously expressed intent of Congress.”  Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843 (1984).

Judging by the questions at oral argument, Justices Breyer, Ginsburg, Kagan, and Sotomayor appear to be in favor of upholding the IRS’ interpretation as a permissible construction of Code § 36B while Justices Alito and Scalia appear to be in the opposite camp.  Thus, the count appears to be four to three without a clear indication of where Chief Justice Roberts or Justice Kennedy will come out—this assumes that Justice Thomas is with the latter group since, as usual, he did not ask any questions at oral argument.

Of course, it is a dangerous exercise to attempt to predict the outcome of a case based on the questions asked by the Justices.  But, interestingly, Professor Ed Lee of ITT Chicago-Kent College of Law has applied a method of predicting the outcome of Supreme Court cases to King based on exactly that.  Simply put, “the party that receives the most questions from the Justices during oral argument is more likely to lose.”  Edward Lee, Ed Lee: Predicting the Winners, ITT Chicago-Kent College of Law SCOTUS Now,  Professor Lee credits Judge Richard Posner of the Seventh Circuit and Professors Lee Epstein of Washington University and William Landes of the University of Chicago Law School with having performed a statistical analysis of this method.  See Lee Epstein, William M. Landes, & Richard A. Posner, Inferring the Winning Party in the Supreme Court from the Pattern of Questioning at Oral Argument, 39 J. Legal Stud. 433 (2010).

According to Professor Lee, based on this method, King could go either way.  However, he predicts that the challengers of the IRS’ interpretation will prevail.  Edward Lee, Affordable Care Act, OT 2014, Predicting the Winners, Predicting the Winner in King v. Burwell—Will Obamacare Stand?, ITT Chicago-Kent College of Law SCOTUS Now, March 4, 2015,  With regard to Justice Kennedy, Professor Lee writes the following: “[I]n his questions, Kennedy floated a theory of constitutional doubt that would, if applied, favor the Solicitor General.  But if I stick to the question count method, Kennedy’s question count favors the Petitioner.”

A decision in King is expected in the next few months so we shall soon find out.