Like the recent Supreme Court decision in Hobby Lobby, the D.C. Circuit’s ruling earlier this week in Halbig v. Burwell is being hailed by conservatives and bemoaned by liberals as a death knell for Obamacare. Unlike the decision in Hobby Lobby, however the D.C. Circuit’s ruling is not the end of the matter, and many liberals are finding hope in the ruling of the 4th Circuit the same day, the probability of an en banc hearing in the D.C. Circuit, and the ultimate possibility of a favorable Supreme Court decision. In an earlier post in HealthLawProf, I decided to take seriously the possibility of damage control from a limited reading of Hobby Lobby. It is pretty much universally agreed—and I believe correctly—that it is not possible to do similar damage control by giving a limited reading to Halbig v. Burwell. If the ruling stands, that tax subsidies are not available to people purchasing coverage through the exchanges in the states that are letting the federal government do the work, many important other provisions of the ACA will be untenable, including the penalties for large employers not offering insurance whose employees receive subsidies and likely the individual mandate itself. But I think it is possible to undermine Halbig in a way not generally recognized by the liberal critics who argue (correctly) that the statutory provision at issue is ambiguous: argue that the jurisprudence of the majority opinion in Halbig is internally inconsistent. Here’s how.
Under D.C. Circuit precedent, the court must “uphold an agency action unless we find it to be ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” So, the question for the court was whether the IRS rule permitting individuals purchasing insurance through federally-run exchanges was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. In concluding that it was, Judge Griffith’s opinion for the court reasoned that it was not in accordance with law. That is, Judge Griffith found that there was no ambiguity in the relevant provision of ACA that permitted the IRS to interpret the statute as it did. Here’s where much of the criticism takes him on. But there’s more to say.
In reaching the conclusion that the statutory language is not ambiguous, Judge Griffith purported to rely on a literalist approach to statutory interpretation. But he did not in fact rely consistently on such an approach—nor could he have done so. The problem is that in order to formulate the literalist question to answer, Judge Griffith had to resolve several issues in a manner that was not literalist at all.
Here’s what Judge Griffith says:
“But section 36B‘s formula for calculating the credit works further limits on who may receive the subsidy. According to that formula, the credit is to equal the sum of the ‘premium assistance amounts’ for each ‘coverage month.’ Id. § 36B(b)(l). The ‘premium assistance amount’ is based on the cost of a ‘qualified health plan … enrolled in through an Exchange established by the State under [section] 1311 of the [ACA].’ Id. § 36B(b)(2); see also 42 U.S.C. §§ 18021(a)(1), 18031(c)(1) (establishing requirements for ‘qualified health plans’). Likewise, a ‘coverage month” is a month for which, “as of the first day of such month the taxpayer … is covered by a qualified health plan … that was enrolled in through an Exchange established by the State under section 1311 of the [ACA].” 26 U.S.C. § 36B(c)(2)(A)(i). In other words, the tax credit is available only to subsidize the purchase of insurance on an “Exchange established by the State under section 1311 of the [ACA].”
In this passage, Judge Griffith makes two important jurisprudential choices: that a literalist interpretation is to be used and that it is to be directed toward particular phrases. With respect to the first point, Judge Griffith is not consistent in his use of a literalist interpretation. In concluding that states are not required to establish exchanges, he writes: “But, as the parties agree, despite its seemingly mandatory language, section 1311 more cajoles than commands. A state is not literally required to establish an Exchange; the ACA merely encourages it to do so.” This, despite section 1311’s literal language: “Each state shall . . .,” 42 U.S.C. § 18031(b)(1). If states were required to establish exchanges, the interpretation of 26 U.S.C. § 36B(b)(2) would pose the quite different problem of what to do if a state had failed to meet its obligations, as Judge Griffith appears to recognize.
With respect to the second point, Judge Griffith is also not consistent in how he selects the statutory language to be literally construed: an “Exchange established by the State under section 1311.” The crucial turning point for Judge Griffith’s argument that subsidies are only available through state-established exchanges is that this passage is definitional, not operational. To reach this conclusion, he relies on the language of 26 U.S.C. § 36B(b)(1) “In general–The term ‘premium assistance credit amount’ means, with respect to any taxable year, the sum of the premium assistance amounts determined under paragraph (2).” It is the use of “means” in this subsection that, for Judge Griffith, makes what follows a definition. But the reference to exchanges established by the state occurs in the next subsection, 26 U.S.C. § 26B(b)(2), which states what “the premium assistance amount is.” To reach the conclusion that this language is definitional, Judge Griffith must view the language about “premium assistance credit amount”—which is preceded by “in general” as applying to the method for calculating what the assistance amount is in the next subsection. He must read subsection (b)(2) in the context of the preceding subsection. This reasoning also is not literalist—it puts the critical language in this context despite Judge Griffith’s refusal also to put it in the context of other sections of the statute. This point is developed admirably in Judge Edwards’ dissent pointing out how § 36B(b)(2) might be read in the context of the requirement that states establish exchanges. Admittedly, the context used by Judge Griffith is the general statement in the preceding subsection, but it is context nonetheless, albeit in a poorly-drafted statute.
So in addition to being implausible on many grounds, Judge Griffith’s opinion is internally inconsistent. Either he must admit that literalist reasoning is insufficient for the conclusion he reaches, or he must give up the claim to be literalist and whatever plausibility it lends to his argument.
[LPF]
[cross posted in HealthLawProf]