King v. Burwell Will Reverberate Well Beyond Obamacare

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On March 4, the Supreme Court will hear oral arguments in King v. Burwell, a lawsuit that challenges the Internal Revenue Service's implementation of the Patient Protection and Affordable Care Act (PPACA). Specifically, the lawsuit asserts that the PPACA limits federal subsidies to health insurance purchased from state-run health care exchanges, while the IRS has determined that federal subsidies are available for purchases on all health care exchanges-including those established by the federal government. While the decision in King v. Burwell will directly affect the ill-crafted health care law, its longer term implications will reverberate well beyond the PPACA, potentially redefining the broader constitutional balance between branches of government.

The outcome of this case is not trivial; 36 states do not have state run exchanges, and roughly five million people may lose their subsidies if the court rules that the IRS improperly implemented the legislation. But more generally, this case is about the limits of the administrative state. If the courts defer to the agency and accept the Internal Revenue Service's rewriting of the rules, the ascendancy of the administrative state continues, at the expense of the rule of law. If, in fact, there is a problem with how the legislation is written, the Court should simply rule that Congress must clarify the law, as it has done in many instances. Yet politics is making this traditional response unpalatable for proponents of the ACA.

Under certain circumstances, the court grants federal agencies a degree of latitude when writing regulations to implement legislation. Specifically, under the Chevron deference, if the underlying statute is silent or ambiguous, the court will defer to the agency, which, it is assumed, has the expertise to implement the statute. In this case, King and the other petitioners argue that there is no silence or ambiguity; the statute clearly states that subsidies are available only in state-run exchanges. The government, on the other hand, will argue that in the broader context of the PPACA, it is apparent that subsidies should be available through all exchanges. The court's review is necessary, therefore, to reaffirm that judicial acquiescence to an agency rewriting federal law is not Chevron deference.

While the executive branch and the administration are to blame for moving forward with regulations that attempt to redefine the legislation, Congress is just as much to blame for fast-tracking ill-defined and poorly drafted legislation through the reconciliation process. The notion of passing something to find out what it is turns the legislative process on its head. Clearly, legislators did not have the time to assess the 900 pages of the PPACA and the results are proving to be problematic.

While King v. Burwell is popularly framed as an assault on ObamaCare that will disenfranchise millions, it must be remembered that it is the PPACA that is the problem. This case is not an attempt to overturn the PPACA, but rather a demand that the PPACA be enforced as written. And as the PPACA is written, plenty of people are denied subsidies. In fact, the lack of subsidies for federal exchanges can be construed as a strong incentive specifically included in the legislation so that states would create their own exchanges. That states failed to establish their own exchanges suggests they knowingly deferred to federal exchanges with a full understanding that they would be forgoing subsidies. Simply because the incentive failed to achieve the desired result, the IRS does not have the authority to rewrite the legislation to make it more inclusive-that is the sole purview of Congress.

The U.S. Constitution established three branches of government each with its own clearly defined duties and responsibilities to ensure power did not unduly collect in one branch. The balance of power was meant to be shared among the branches as a bulwark against tyranny. Over time, however, the dynamics have shifted and many claim the courts have ceded far too much power to both Congress and the executive branch. If, in fact, problems are found to exist in a piece of legislation, the Supreme Court should return the bill to Congress for further clarification.

It is up to Congress, then, to address the shortcomings of the PPACA. The Internal Revenue Service cannot be left to divine congressional intent. The Republican Congress should be prepared to act, because there will be an explosion of confusion should the Supreme Court validate King's assertions against the PPACA.


Wayne Brough, Ph.D is Chief Economist and Vice President of Research at FreedomWorks.  

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