Professors Nicholas Bagley and Jonathan Adler had a very interesting discussion on Halbig v. Sebelius — the case challenging the legality of offering premium tax credits through federally facilitated exchanges (about which I have written previously here and here) — in a recent Federalist Society Podcast. One particularly intriguing question that emerged concerned the peculiar legislative history of the ACA, and what role that should play in how courts read the text of the law.
As Professor Abbe Gluck has summarized well, the text of the ACA features some sloppy drafting errors, largely due to the manner in which the bill became law:
[T]he ACA is a very badly drafted statute. And it’s badly drafted for a simple reason that turns out to be important to understanding how the pending litigation should be resolved: Because Senator Ted Kennedy died in the middle of the legislative process and was replaced by Republican Scott Brown, the statute never went through the usual legislative process, including the usual legislative clean-up process. Instead, because the Democrats lost their 60th filibuster-preventing vote, the version that had passed the Senate before Brown took office, which everyone initially had thought would be a mere first salvo, had to effectively serve as the final version, unchangeable by the House, because nothing else could get through the Senate. In the end, the statute was synthesized across both chambers by an alternative process, called “reconciliation,” which allows for only limited changes but avoids a filibuster under Congress’s rules.
I think it’s fairly clear that the D.C. Circuit in Halbig (and the 4th Circuit in King) are encountering one such sloppy drafting error. Without any meaningful legislative history suggesting that tax credits would be denied to citizens in states with a federally facilitated exchange, the ACA authorizes tax credits for individuals purchasing insurance on an “Exchange established by the State.” While the provision of the law instructing HHS to create federally facilitated changes requires the Secretary to “establish and operate such Exchange within the State” (i.e., the state exchange), the challengers argue that the words “established by the State” in the tax-credit provision preclude an interpretation of the law that allows for tax credits to flow through federal exchanges as well.
The reason I call this “sloppy drafting” rather than a purposeful command is that, aside from the striking lack of historical support for an interpretation denying tax credits on federally facilitated exchanges, this interpretation would be nonsensical when read into the law as a whole. To take only one of many examples, section 1312 of the ACA defines qualified individuals (i.e. those people who can purchase health insurance through an exchange) as individuals “who . . . resides in the State that established the Exchange.” If “established” holds the exclusive meaning that the challengers in Halbig say it does, there could never be a qualified individual in the states with federally facilitated exchanges because the State didn’t “establish the Exchange” in the State in which these individuals reside. In other words, nobody could purchase insurance through a federally facilitated exchange because nobody would be qualified. This would leave the federally facilitated exchanges with no purpose. As Judge Friedman found in federal district court, conventional canons of statutory interpretation should preclude such an absurd reading of the law.