KING ET AL. v. BURWELL, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.
No. 14-114
SUPREME COURT OF THE UNITED STATES
June 25, 2015
576 U. S. ____ (2015)
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
KING ET AL. v. BURWELL, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 14-114. Argued March 4, 2015—Decided June 25, 2015
The Patient Protection and Affordable Care Act grew out of a long history of failed health insurance reform. In the 1990s, several States sought to expand access to coverage by imposing a pair of insurance market regulations—a “guaranteed issue” requirement, which bars insurers from denying coverage to any person because of his health, and a “community rating” requirement, which bars insurers from charging a person higher premiums for the same reason. The reforms achieved the goal of expanding access to coverage, but they also encouraged people to wait until they got sick to buy insurance. The result was an economic “death spiral“: premiums rose, the number of people buying insurance declined, and insurers left the market entirely. In 2006, however, Massachusetts discovered a way to make the guaranteed issue and community rating requirements work—by requiring individuals to buy insurance and by providing tax credits to certain individuals to make insurance more affordable. The combination of these three reforms—insurance market regulations, a coverage mandate, and tax credits—enabled Massachusetts to drastically reduce its uninsured rate.
The Affordable Care Act adopts a version of the three key reforms that made the Massachusetts system successful. First, the Act adopts the guaranteed issue and community rating requirements.
In addition to those three reforms, the Act requires the creation of an “Exchange” in each State—basically, a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own Exchange, but provides that the Federal Government will establish “such Exchange” if the State does not.
Petitioners are four individuals who live in Virginia, which has a Federal Exchange. They do not wish to purchase health insurance. In their view, Virginia‘s Exchange does not qualify as “an Exchange established by the State under [
Petitioners challenged the IRS Rule in Federal District Court. The District Court dismissed the suit, holding that the Act unambiguously made tax credits available to individuals enrolled through a Federal Exchange. The Court of Appeals for the Fourth Circuit affirmed. The Fourth Circuit viewed the Act as ambiguous, and deferred to the IRS‘s interpretation under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837.
Held: Section 36B‘s tax credits are available to individuals in States that have a Federal Exchange. Pp. 7–21.
(a) When analyzing an agency‘s interpretation of a statute, this Court often applies the two-step framework announced in Chevron, 467 U. S. 837. But Chevron does not provide the appropriate framework here. The tax credits are one of the Act‘s key reforms and whether they are available on Federal Exchanges is a question of deep “economic and political significance“; had Congress wished to assign that question to an agency, it surely would have done so expressly. And it is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort.
It is instead the Court‘s task to determine the correct reading of
(b) When read in context, the phrase “an Exchange established by the State under [
The argument that the phrase “established by the State” would be superfluous if Congress meant to extend tax credits to both State and Federal Exchanges is unpersuasive. This Court‘s “preference for avoiding surplusage constructions is not absolute.” Lamie v. United States Trustee, 540 U. S. 526, 536. And rigorous application of that canon does not seem a particularly useful guide to a fair construction of the Affordable Care Act, which contains more than a few examples of inartful drafting. The Court nevertheless must do its best, “bearing in mind the ‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.‘” Utility Air Regulatory Group v. EPA, 573 U. S. 302. Pp. 9–15.
(c) Given that the text is ambiguous, the Court must look to the broader structure of the Act to determine whether one of Section 36B‘s “permissible meanings produces a substantive effect that is compatible with the rest of the law.” United Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, Ltd., 484 U. S. 365, 371.
Here, the statutory scheme compels the Court to reject petitioners’
The combination of no tax credits and an ineffective coverage requirement could well push a State‘s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation, but those requirements only work when combined with the coverage requirement and tax credits. It thus stands to reason that Congress meant for those provisions to apply in every State as well. Pp. 15–19.
(d) The structure of Section 36B itself also suggests that tax credits are not limited to State Exchanges. Together,
(e) Petitioners’ plain-meaning arguments are strong, but the Act‘s context and structure compel the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid. Pp. 20–21.
759 F. 3d 358, affirmed.
ROBERTS, C. J., delivered the opinion of the Court, in which KEN-
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 14-114
DAVID KING, ET AL., PETITIONERS v. SYLVIA BURWELL, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
[June 25, 2015]
CHIEF JUSTICE ROBERTS delivered the opinion of the Court.
The Patient Protection and Affordable Care Act adopts a series of interlocking reforms designed to expand coverage in the individual health insurance market. First, the Act bars insurers from taking a person‘s health into account when deciding whether to sell health insurance or how much to charge. Second, the Act generally requires each person to maintain insurance coverage or make a payment to the Internal Revenue Service. And third, the Act gives tax credits to certain people to make insurance more affordable.
In addition to those reforms, the Act requires the creation of an “Exchange” in each State—basically, a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own Exchange, but provides that the Federal Government will establish the Exchange if the State does not.
This case is about whether the Act‘s interlocking re-
I
A
The Patient Protection and Affordable Care Act, 124 Stat. 119, grew out of a long history of failed health insurance reform. In the 1990s, several States began experimenting with ways to expand people‘s access to coverage. One common approach was to impose a pair of insurance market regulations—a “guaranteed issue” requirement, which barred insurers from denying coverage to any person because of his health, and a “community rating” requirement, which barred insurers from charging a person higher premiums for the same reason. Together, those requirements were designed to ensure that anyone who wanted to buy health insurance could do so.
The guaranteed issue and community rating requirements achieved that goal, but they had an unintended consequence: They encouraged people to wait until they got sick to buy insurance. Why buy insurance coverage when you are healthy, if you can buy the same coverage for the same price when you become ill? This consequence—known as “adverse selection“—led to a second: Insurers were forced to increase premiums to account for the fact that, more and more, it was the sick rather than the healthy who were buying insurance. And that consequence fed back into the first: As the cost of insurance rose, even more people waited until they became ill to buy it.
This led to an economic “death spiral.” As premiums rose higher and higher, and the number of people buying insurance sank lower and lower, insurers began to leave the market entirely. As a result, the number of people
This cycle happened repeatedly during the 1990s. For example, in 1993, the State of Washington reformed its individual insurance market by adopting the guaranteed issue and community rating requirements. Over the next three years, premiums rose by 78 percent and the number of people enrolled fell by 25 percent. By 1999, 17 of the State‘s 19 private insurers had left the market, and the remaining two had announced their intention to do so. Brief for America‘s Health Insurance Plans as Amicus Curiae 10–11.
For another example, also in 1993, New York adopted the guaranteed issue and community rating requirements. Over the next few years, some major insurers in the individual market raised premiums by roughly 40 percent. By 1996, these reforms had “effectively eliminated the commercial individual indemnity market in New York with the largest individual health insurer exiting the market.” L. Wachenheim & H. Leida, The Impact of Guaranteed Issue and Community Rating Reforms on States’ Individual Insurance Markets 38 (2012).
In 1996, Massachusetts adopted the guaranteed issue and community rating requirements and experienced similar results. But in 2006, Massachusetts added two more reforms: The Commonwealth required individuals to buy insurance or pay a penalty, and it gave tax credits to certain individuals to ensure that they could afford the insurance they were required to buy. Brief for Bipartisan Economic Scholars as Amici Curiae 24–25. The combination of these three reforms—insurance market regulations, a coverage mandate, and tax credits—reduced the uninsured rate in Massachusetts to 2.6 percent, by far the lowest in the Nation. Hearing on Examining Individual State Experiences with Health Care Reform Coverage Initiatives in the Context of National Reform before the Senate Committee on Health, Education, Labor, and
B
The Affordable Care Act adopts a version of the three key reforms that made the Massachusetts system successful. First, the Act adopts the guaranteed issue and community rating requirements. The Act provides that “each health insurance issuer that offers health insurance coverage in the individual . . . market in a State must accept every . . . individual in the State that applies for such coverage.”
Second, the Act generally requires individuals to maintain health insurance coverage or make a payment to the IRS.
Third, the Act seeks to make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 percent and 400 percent of the federal poverty line.
These three reforms are closely intertwined. As noted,
C
In addition to those three reforms, the Act requires the creation of an “Exchange” in each State where people can shop for insurance, usually online.
The issue in this case is whether the Act‘s tax credits are available in States that have a Federal Exchange rather than a State Exchange. The Act initially provides that tax credits “shall be allowed” for any “applicable taxpayer.”
D
Petitioners are four individuals who live in Virginia, which has a Federal Exchange. They do not wish to purchase health insurance. In their view, Virginia‘s Exchange does not qualify as “an Exchange established by the State under [
Under the IRS Rule, however, Virginia‘s Exchange would qualify as “an Exchange established by the State under [
Petitioners challenged the IRS Rule in Federal District Court. The District Court dismissed the suit, holding that the Act unambiguously made tax credits available to individuals enrolled through a Federal Exchange. King v. Sebelius, 997 F. Supp. 2d 415 (ED Va. 2014). The Court of Appeals for the Fourth Circuit affirmed. 759 F. 3d 358 (2014). The Fourth Circuit viewed the Act as “ambiguous and subject to at least two different interpretations.” Id., at 372. The court therefore deferred to the IRS‘s interpretation under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984). 759 F. 3d, at 376.
The same day that the Fourth Circuit issued its decision, the Court of Appeals for the District of Columbia Circuit vacated the IRS Rule in a different case, holding that the Act “unambiguously restricts” the tax credits to State Exchanges. Halbig v. Burwell, 758 F. 3d 390, 394 (2014). We granted certiorari in the present case. 574 U. S. 988 (2014).
II
The Affordable Care Act addresses tax credits in what is now
The parties dispute whether Section 36B authorizes tax credits for individuals who enroll in an insurance plan through a Federal Exchange. Petitioners argue that a
When analyzing an agency‘s interpretation of a statute, we often apply the two-step framework announced in Chevron, 467 U.S. 837. Under that framework, we ask whether the statute is ambiguous and, if so, whether the agency‘s interpretation is reasonable. Id., at 842–843. This approach “is premised on the theory that a statute‘s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.” FDA v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 159 (2000). “In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.” Ibid.
This is one of those cases. The tax credits are among the Act‘s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people. Whether those credits are available on Federal Exchanges is thus a question of deep “economic and political significance” that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly. Utility Air Regulatory Group v. EPA, 573 U. S. 302, 324 (2014) (quoting Brown & Williamson, 529 U. S., at 160). It is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort. See Gonzales v. Oregon, 546 U.S. 243, 266–267 (2006). This is not a case for the IRS.
It is instead our task to determine the correct reading of Section 36B. If the statutory language is plain, we must
A
We begin with the text of Section 36B. As relevant here, Section 36B allows an individual to receive tax credits only if the individual enrolls in an insurance plan through “an Exchange established by the State under [
First, all parties agree that a Federal Exchange qualifies as “an Exchange” for purposes of Section 36B. See Brief for Petitioners 22; Brief for Respondents 22.
Second, we must determine whether a Federal Exchange is “established by the State” for purposes of Section 36B. At the outset, it might seem that a Federal Exchange cannot fulfill this requirement. After all, the Act defines “State” to mean “each of the 50 States and the District of Columbia“—a definition that does not include the Federal Government.
After telling each State to establish an Exchange, Section 18031 provides that all Exchanges “shall make available qualified health plans to qualified individuals.”
These provisions suggest that the Act may not always use the phrase “established by the State” in its most natural sense. Thus, the meaning of that phrase may not be as clear as it appears when read out of context.
Third, we must determine whether a Federal Exchange is established “under [
The Act defines the term “Exchange” to mean “an American Health Benefit Exchange established under section 18031.”
This interpretation of “under [
The upshot of all this is that the phrase “an Exchange established by the State under [
The conclusion that Section 36B is ambiguous is further supported by several provisions that assume tax credits will be available on both State and Federal Exchanges. For example, the Act requires all Exchanges to create outreach programs that must “distribute fair and impartial information concerning . . . the availability of premium tax credits under section 36B.”
Petitioners and the dissent respond that the words “established by the State” would be unnecessary if Congress meant to extend tax credits to both State and Federal Exchanges. Brief for Petitioners 20; post, at 4–5. But “our preference for avoiding surplusage constructions is not absolute.” Lamie, 540 U. S., at 536; see also Marx v. General Revenue Corp., 568 U. S. 371, 385 (2013) (“The canon against surplusage is not an absolute rule“). And specifically with respect to this Act, rigorous application of the canon does not seem a particularly useful guide to a fair construction of the statute.
The Affordable Care Act contains more than a few examples of inartful drafting. (To cite just one, the Act creates three separate Section 1563s. See 124 Stat. 270, 911, 912.) Several features of the Act‘s passage contributed to that unfortunate reality. Congress wrote key parts of the Act behind closed doors, rather than through “the traditional legislative process.” Cannan, A Legislative History of the Affordable Care Act: How Legislative Procedure Shapes Legislative History, 105 L. Lib. J. 131, 163 (2013). And Congress passed much of the Act using a complicated budgetary procedure known as “reconciliation,” which limited opportunities for debate and amendment, and bypassed the Senate‘s normal 60-vote filibuster requirement. Id., at 159–167. As a result, the Act does not reflect the type of care and deliberation that one might expect of such significant legislation. Cf. Frankfurter,
Anyway, we “must do our best, bearing in mind the fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” Utility Air Regulatory Group, 573 U. S., at 320 (internal quotation marks omitted). After reading Section 36B along with other related provisions in the Act, we cannot conclude that the phrase “an Exchange established by the State under [Section 18031]” is unambiguous.
B
Given that the text is ambiguous, we must turn to the broader structure of the Act to determine the meaning of Section 36B. “A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme . . . because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law.” United Sav. Assn. of Tex., 484 U. S., at 371. Here, the statutory scheme compels us to reject petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very “death spirals” that Congress designed the Act to avoid. See New York State Dept. of Social Servs. v. Dublino, 413 U. S. 405, 419–420 (1973) (“We cannot interpret federal statutes to negate their own stated purposes.“).3
The guaranteed issue and community rating requirements apply in every State.
Under petitioners’ reading, therefore, the Act would not work in a State with a Federal Exchange. As they see it, one of the Act‘s three major reforms—the tax credits—would not apply. And a second major reform—the coverage requirement—would not apply in a meaningful way. As a result, a State with a Federal Exchange would have the guaranteed issue and community rating requirements
It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation. But those requirements only work when combined with the coverage requirement and tax credits. So it stands to reason that Congress meant for those provisions to apply in every State as well.
Congress‘s findings confirm this view. The Act contains an entire section entitled “Requirement to maintain minimum essential coverage,” which includes several findings about the coverage requirement.
The statutory relationship between the interlocking reforms further confirms this view. The Act provided that the three reforms should take effect on the same day—January 1, 2014. See supra, at 5. That suggests that the reforms were meant to work together. And they can only work together if they all apply in every State. If tax credits are not available on Federal Exchanges, the interlocking reforms would not be interlocking.
In addition, other provisions of the Act would be un-
Petitioners’ response is that this is “exactly” what Congress intended. Brief for Petitioners 43. They argue that the Act was designed to provide States with a “powerful incentive” to establish their own Exchanges: A State‘s citizens would receive tax credits only if the State created its own Exchange. Id., at 36.
But this argument is also implausible. The Act does not contain a single sentence that even hints at the possibility that a State‘s “failure” to establish its own Exchange would result in the elimination of tax credits for its citizens. Congress‘s failure to mention such a significant consequence is strong evidence that it did not intend it. After all, “Congress . . . does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions—it does not, one might say, hide elephants in mouseholes.” Whitman, 531 U. S., at 468.
The threat of such a consequence would also be an un-likely way to provide an “incentive” for States to act. The Act already contains a clear incentive: If a State does not
C
The structure of Section 36B itself also suggests that tax credits are not limited to State Exchanges. Together,
According to petitioners, however, those provisions are an empty promise in States with a Federal Exchange. In their view, an applicable taxpayer in such a State is eligible for a tax credit, but the amount of that tax credit is always zero. Why? Because the amount of the tax credit is based on the premium for a plan “enrolled in through an Exchange established by the State under [
That argument is hard to square with the Act‘s other
Petitioners’ argument also fails because it would mean that the tax credits are available only on a zero-dollar basis in States with a Federal Exchange. Congress, however, “does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions.” Whitman, 531 U. S., at 468. It is implausible that Congress would have hidden the Act‘s most important provision in two “premium assistance” definitions that are buried deep within the Tax Code.
***
Petitioners’ plain-meaning arguments are strong. The Act‘s context and structure, however, compel the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid. The phrase “an Exchange established by the State under [
The Affordable Care Act contains more than its share of vague terms or ancillary provisions. But “it is a fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.” Utility Air Regulatory Group, 573 U. S., at 320 (internal quotation marks omitted). Our duty, after all, is “to construe statutes, not isolated provisions.” Graham County, 559 U. S., at 290 (internal quotation marks omitted). In this case, the context and structure of the Act make it clear that the tax credits are available in every State, regardless of whether the State or the Federal Government established the Exchange.
The judgment of the United States Court of Appeals for the Fourth Circuit is affirmed.
It is so ordered.
As discussed above, Congress based the Affordable Care Act on three major reforms: first, the guaranteed issue and community rating requirements; second, a requirement that individuals maintain health insurance coverage or make a payment to the IRS; and third, the tax credits for individuals with household incomes between 100 percent and 400 percent of the federal poverty line. In a State that establishes its own Exchange, these three reforms work together to expand insurance coverage. The guaranteed issue and community rating requirements ensure that anyone can buy insurance; the coverage requirement creates an incentive for people to do so before they get sick; and the tax credits—it is hoped—make insurance more affordable. Together, those reforms “minimize . . . adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums.”
Under petitioners’ reading, however, the Act would operate quite differently in a State with a Federal Exchange. As they see it, one of the Act’s three major reforms—the tax credits—would not apply. And a second major reform—the coverage requirement—would not apply in a meaningful way. As explained earlier, the coverage requirement applies only when the cost of buying health insurance (minus the amount of the tax credits) is less than eight percent of an individual’s income.
The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. One study predicts that premiums would increase by 47 percent and enrollment would decrease by 70 percent. E. Saltzman & C. Eibner, The Effect of Eliminating the Affordable Care Act’s Tax Credits in Federally Facilitated Marketplaces (2015). Another study predicts that premiums would increase by 35 percent and enrollment would decrease by 69 percent. L. Blumberg, M. Buettgens, & J. Holahan, The Implications of a Supreme Court Finding for the Plaintiff in King vs. Burwell: 8.2 Million More Uninsured and 35% Higher Premiums (2015). And those effects would not be limited to individuals who purchase insurance on the Exchanges. Because the Act requires insurers to treat the entire individual market as a single risk pool,
It is implausible that Congress meant the Act to operate in this manner. See National Federation of Independent Business v. Sebelius, 567 U. S. ___, ___ (2012) (SCALIA, KENNEDY, THOMAS, and ALITO, JJ., dissenting) (slip op., at 60) (“Without the federal subsidies . . . the exchanges would not operate as Congress intended and may not operate at all.”). Congress made the guaranteed issue and community rating requirements applicable in every State
Petitioners respond that Congress was not worried about the effects of withholding tax credits from States with Federal Exchanges because “Congress evidently believed it was offering states a deal they would not refuse.” Brief for Petitioners 36. Congress may have been wrong about the States’ willingness to establish their own Exchanges, petitioners continue, but that does not allow this Court to rewrite the Act to fix that problem. That is particularly true, petitioners conclude, because the States likely would have created their own Exchanges in the absence of the IRS Rule, which eliminated any incentive that the States had to do so. Id., at 36–38.
Section 18041 refutes the argument that Congress believed it was offering the States a deal they would not
C
Finally, the structure of Section 36B itself suggests that tax credits are not limited to State Exchanges. Section 36B(a) initially provides that tax credits “shall be allowed” for any “applicable taxpayer.” Section 36B(c)(1) then defines an “applicable taxpayer” as someone who (among other things) has a household income between 100 percent and 400 percent of the federal poverty line. Together, these two provisions appear to make anyone in the specified income range eligible to receive a tax credit.
According to petitioners, however, those provisions are an empty promise in States with a Federal Exchange. In their view, an applicable taxpayer in such a State would be eligible for a tax credit—but the amount of that tax credit would always be zero. And that is because—diving several layers down into the Tax Code—Section 36B says that the amount of the tax credits shall be “an amount equal to the premium assistance credit amount,” §36B(a); and then says that the term “premium assistance credit amount” means “the sum of the premium assistance amounts determined under paragraph (2) with respect to all coverage months of the taxpayer occurring during the taxable year,” §36B(b)(1); and then says that the term “premium assistance amount” is tied to the amount of the monthly premium for insurance purchased on “an Exchange established by the State under [42 U. S. C.
We have held that Congress “does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions.” Whitman v. American Trucking Assns., Inc., 531 U. S. 457, 468 (2001). But in petitioners’ view, Congress made the viability of the entire Affordable Care Act turn on the ultimate ancillary provision: a sub-sub-sub section of the Tax Code. We doubt that is what Congress meant to do. Had Congress meant to limit tax credits to State Exchanges, it likely would have done so in the definition of “applicable taxpayer” or in some other prominent manner. It would not have used such a winding path of connect-the-dots provisions about the amount of the credit.5
D
Petitioners’ arguments about the plain meaning of Section 36B are strong. But while the meaning of the phrase “an Exchange established by the State under [42 U. S. C. §18031]” may seem plain “when viewed in isolation,” such a reading turns out to be “untenable in light of [the statute] as a whole.” Department of Revenue of Ore. v. ACF Industries, Inc., 510 U. S. 332, 343 (1994). In this instance, the context and structure of the Act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.
* * *
In a democracy, the power to make the law rests with those chosen by the people. Our role is more confined—“to say what the law is.” Marbury v. Madison, 1 Cranch 137, 177 (1803). That is easier in some cases than in others. But in every case we must respect the role of the Legislature, and take care not to undo what it has done. A fair reading of legislation demands a fair understanding of the legislative plan.
Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.
The judgment of the United States Court of Appeals for the Fourth Circuit is
Affirmed.
No. 14–114
DAVID KING, ET AL., PETITIONERS v. SYLVIA BURWELL, SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
[June 25, 2015]
JUSTICE SCALIA, with whom JUSTICE THOMAS and JUSTICE ALITO join, dissenting.
The Court holds that when the Patient Protection and Affordable Care Act says “Exchange established by the State” it means “Exchange established by the State or the Federal Government.” That is of course quite absurd, and the Court’s 21 pages of explanation make it no less so.
I
The Patient Protection and Affordable Care Act makes major reforms to the American health-insurance market. It provides, among other things, that every State “shall . . . establish an American Health Benefit Exchange”—a marketplace where people can shop for health-insurance plans.
A separate part of the Act—housed in §36B of the Internal Revenue Code—grants “premium tax credits” to subsidize certain purchases of health insurance made on Exchanges. The tax credit consists of “premium assistance amounts” for “coverage months.”
This case requires us to decide whether someone who buys insurance on an Exchange established by the Secretary gets tax credits. You would think the answer would be obvious—so obvious there would hardly be a need for the Supreme Court to hear a case about it. In order to receive any money under §36B, an individual must enroll in an insurance plan through an “Exchange established by the State.” The Secretary of Health and Human Services is not a State. So an Exchange established by the Secretary is not an Exchange established by the State—which means people who buy health insurance through such an Exchange get no money under §36B.
Words no longer have meaning if an Exchange that is not established by a State is “established by the State.” It is hard to come up with a clearer way to limit tax credits to state Exchanges than to use the words “established by the State.” And it is hard to come up with a reason to include the words “by the State” other than the purpose of limiting credits to state Exchanges. “[T]he plain, obvious, and rational meaning of a statute is always to be preferred to any curious, narrow, hidden sense that nothing but the exigency of a hard case and the ingenuity and study of an acute and powerful intellect would discover.” Lynch v. Alworth-Stephens Co., 267 U. S. 364, 370 (1925) (internal quotation marks omitted). Under all the usual rules of interpretation, in short, the Government should lose this case. But normal rules of interpretation seem always to
II
The Court interprets §36B to award tax credits on both federal and state Exchanges. It accepts that the “most natural sense” of the phrase “Exchange established by the State” is an Exchange established by a State. Ante, at 11. (Understatement, thy name is an opinion on the Affordable Care Act!) Yet the opinion continues, with no semblance of shame, that “it is also possible that the phrase refers to all Exchanges—both State and Federal.” Ante, at 13. (Impossible possibility, thy name is an opinion on the Affordable Care Act!) The Court claims that “the context and structure of the Act compel [it] to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.” Ante, at 21.
I wholeheartedly agree with the Court that sound interpretation requires paying attention to the whole law, not homing in on isolated words or even isolated sections. Context always matters. Let us not forget, however, why context matters: It is a tool for understanding the terms of the law, not an excuse for rewriting them.
Any effort to understand rather than to rewrite a law must accept and apply the presumption that lawmakers use words in “their natural and ordinary signification.” Pensacola Telegraph Co. v. Western Union Telegraph Co., 96 U. S. 1, 12 (1878). Ordinary connotation does not always prevail, but the more unnatural the proposed interpretation of a law, the more compelling the contextual evidence must be to show that it is correct. Today’s interpretation is not merely unnatural; it is unheard of. Who would ever have dreamt that “Exchange established by the State” means “Exchange established by the State or the Federal Government”? Little short of an express statutory definition could justly adopting this singular reading.
Far from offering the overwhelming evidence of meaning needed to justify the Court’s interpretation, other contextual clues undermine it at every turn. To begin with, other parts of the Act sharply distinguish between the establishment of an Exchange by a State and the establishment of an Exchange by the Federal Government. The States’ authority to set up Exchanges comes from one provision, §18031(b); the Secretary’s authority comes from an entirely different provision, §18041(c). Funding for States to establish Exchanges comes from one part of the law, §18031(a); funding for the Secretary to establish Exchanges comes from an entirely different part of the law, §18121. States generally run state-created Exchanges; the Secretary generally runs federally created Exchanges. §18041(b)–(c). And the Secretary’s authority to set up an Exchange in a State depends upon the State’s “[f]ailure to establish [an] Exchange.” §18041(c) (emphasis added). Provisions such as these destroy any pretense that a federal Exchange is in some sense also established by a State.
Reading the rest of the Act also confirms that, as relevant here, there are only two ways to set up an Exchange in a State: establishment by a State and establishment by the Secretary. §§18031(b), 18041(c). So saying that an Exchange established by the Federal Government is “established by the State” goes beyond giving words bizarre meanings; it leaves the limiting phrase “by the State” with no operative effect at all. That is a stark violation of the elementary principle that requires an interpreter “to give
Making matters worse, the reader of the whole Act will come across a number of provisions beyond §36B that refer to the establishment of Exchanges by States. Adopting the Court’s interpretation means nullifying the term “by the State” not just once, but again and again throughout the Act. Consider for the moment only those parts of the Act that mention an “Exchange established by the State” in connection with tax credits:
- The formula for calculating the amount of the tax credit, as already explained, twice mentions “an Exchange established by the State.”
26 U. S. C. §36B(b)(2)(A) ,(c)(2)(A)(i) . - The Act directs States to screen children for eligibility for “[tax credits] under section 36B” and for “any other assistance or subsidies available for coverage obtained through” an “Exchange established by the State.”
42 U. S. C. §1396w–3(b)(1)(B) –(C). - The Act requires “an Exchange established by the
State” to use a “secure electronic interface” to determine eligibility for (among other things) tax credits. §1396w–3(b)(1)(D). - The Act authorizes “an Exchange established by the State” to make arrangements under which other state agencies “determine whether a State resident is eligible for [tax credits] under section 36B.” §1396w–3(b)(2).
- The Act directs States to operate Web sites that allow anyone “who is eligible to receive [tax credits] under section 36B” to compare insurance plans offered through “an Exchange established by the State.” §1396w–3(b)(4).
- One of the Act’s provisions addresses the enrollment of certain children in health plans “offered through an Exchange established by the State” and then discusses the eligibility of these children for tax credits. §1397ee(d)(3)(B).
It is bad enough for a court to cross out “by the State” once. But seven times?
Congress did not, by the way, repeat “Exchange established by the State under [§18031]” by rote throughout the Act. Quite the contrary, clause after clause of the law uses a more general term such as “Exchange” or “Exchange established under [§18031].” See, e.g.,
Equating establishment “by the State” with establishment by the Federal Government makes nonsense of other parts of the Act. The Act requires States to ensure (on pain of losing Medicaid funding) that any “Exchange established by the State” uses a “secure electronic inter
It is probably piling on to add that the Congress that wrote the Affordable Care Act knew how to equate two different types of Exchanges when it wanted to do so. The Act includes a clause providing that “[a] territory that establishes . . . an Exchange . . . shall be treated as a State” for certain purposes. §18043(a) (emphasis added). Tellingly, it does not include a comparable clause providing that the Secretary shall be treated as a State for purposes of §36B when she establishes an Exchange.
Faced with overwhelming confirmation that “Exchange established by the State” means what it looks like it means, the Court comes up with argument after feeble argument to support its contrary interpretation. None of its tries comes close to establishing the implausible conclusion that Congress used “by the State” to mean “by the State or not by the State.”
The Court emphasizes that if a State does not set up an
The Court’s next bit of interpretive jiggery-pokery involves other parts of the Act that purportedly presuppose the availability of tax credits on both federal and state Exchanges. Ante, at 13–14. It is curious that the Court is willing to subordinate the express words of the section that grants tax credits to the mere implications of other provisions with only tangential connections to tax credits. One would think that interpretation would work the other way around. In any event, each of the provisions mentioned by the Court is perfectly consistent with limiting
The Court persists that these provisions “would make little sense” if no tax credits were available on federal Exchanges. Ante, at 14. Even if that observation were true, it would show only oddity, not ambiguity. Laws often include unusual or mismatched provisions. The Affordable Care Act spans 900 pages; it would be amazing if its provisions all lined up perfectly with each other. This Court “does not revise legislation . . . just because the text as written creates an apparent anomaly.” Michigan v. Bay Mills Indian Community, 572 U. S. ___, ___ (2014) (slip op., at 10). At any rate, the provisions cited by the Court are not particularly unusual. Each requires an Exchange to perform a standardized series of tasks, some aspects of which relate in some way to tax credits. It is entirely natural for slight mismatches to occur when, as
Roaming even farther afield from §36B, the Court turns to the Act’s provisions about “qualified individuals.” Ante, at 10–11. Qualified individuals receive favored treatment on Exchanges, although customers who are not qualified individuals may also shop there. See Halbig v. Burwell, 758 F. 3d 390, 404–405 (CADC 2014). The Court claims that the Act must equate federal and state establishment of Exchanges when it defines a qualified individual as someone who (among other things) lives in the “State that established the Exchange,”
Least convincing of all, however, is the Court’s attempt to uncover support for its interpretation in “the structure of Section 36B itself.” Ante, at 19. The Court finds it strange that Congress limited the tax credit to state Exchanges in the formula for calculating the amount of the credit, rather than in the provision defining the range of taxpayers eligible for the credit. Had the Court bothered to look at the rest of the Tax Code, it would have seen that the structure it finds strange is in fact quite common. Consider, for example, the many provisions that initially make taxpayers of all incomes eligible for a tax credit, only to provide later that the amount of the credit is zero if the taxpayer’s income exceeds a specified threshold. See, e.g.,
For what it is worth, lawmakers usually draft tax-credit provisions the way they do—i.e., the way they drafted §36B—because the mechanics of the credit require it. Many Americans move to new States in the middle of the year. Mentioning state Exchanges in the definition of “coverage month”—rather than (as the Court proposes) in the provisions concerning taxpayers’ eligibility for the credit—accounts for taxpayers who live in a State with a state Exchange for a part of the year, but a State with a federal Exchange for the rest of the year. In addition,
The Court has not come close to presenting the compelling contextual case necessary to justify departing from the ordinary meaning of the terms of the law. Quite the contrary, context only underscores the outlandishness of the Court’s interpretation. Reading the Act as a whole leaves no doubt about the matter: “Exchange established by the State” means what it looks like it means.
III
For its next defense of the indefensible, the Court turns to the Affordable Care Act’s design and purposes. As relevant here, the Act makes three major reforms. The guaranteed-issue and community-rating requirements prohibit insurers from considering a customer’s health when deciding whether to sell insurance and how much to charge,
This reasoning suffers from no shortage of flaws. To begin with, “even the most formidable argument concerning the statute’s purposes could not overcome the clarity [of] the statute’s text.” Kloeckner v. Solis, 568 U. S. ___, ___, n. 4 (2012) (slip op., at 14, n. 4). Statutory design and purpose matter only to the extent they help clarify an otherwise ambiguous provision. Could anyone maintain with a straight face that §36B is unclear? To mention just the highlights, the Court’s interpretation clashes with a statutory definition, renders words inoperative in at least seven separate provisions of the Act, overlooks the contrast between provisions that say “Exchange” and those that say “Exchange established by the State,” gives the same phrase one meaning for purposes of tax credits but an entirely different meaning for other purposes, and (let us not forget) contradicts the ordinary meaning of the words Congress used. On the other side of the ledger, the Court has come up with nothing more than a general provision that turns out to be controlled by a specific one, a handful of clauses that are consistent with either understanding of establishment by the State, and a resemblance between the tax-credit provision and the rest of the Tax Code. If that is all it takes to make something ambiguous, everything is ambiguous.
Having gone wrong in consulting statutory purpose at all, the Court goes wrong again in analyzing it. The purposes of a law must be “collected chiefly from its words,” not “from extrinsic circumstances.” Sturges v. Crowninshield, 4 Wheat. 122, 202 (1819) (Marshall, C. J.). Only by concentrating on the law’s terms can a judge hope to uncover the scheme of the statute, rather than some other scheme that the judge thinks desirable. Like it or not, the
The Court protests that without the tax credits, the number of people covered by the individual mandate shrinks, and without a broadly applicable individual mandate the guaranteed-issue and community-rating requirements “would destabilize the individual insurance market.” Ante, at 15. If true, these projections would show only that the statutory scheme contains a flaw; they would not show that the statute means the opposite of what it says. Moreover, it is a flaw that appeared as well in other parts of the Act. A different title established a long-term-care insurance program with guaranteed-issue and community-rating requirements, but without an individual mandate or subsidies. §§8001–8002, 124 Stat. 828–847 (2010). This program never came into effect “only because Congress, in response to actuarial analyses predicting that the [program] would be fiscally unsustainable, repealed the provision in 2013.” Halbig, 758 F. 3d, at 410. How could the Court say that Congress would never dream of combining guaranteed-issue and community-rating requirements with a narrow individual mandate, when it combined those requirements with no individual mandate in the context of long-term-care insurance?
Similarly, the Department of Health and Human Services originally interpreted the Act to impose guaranteed-issue and community-rating requirements in the Federal Territories, even though the Act plainly does not make the individual mandate applicable there. Ibid.; see
Compounding its errors, the Court forgets that it is no more appropriate to consider one of a statute’s purposes in isolation than it is to consider one of its words that way. No law pursues just one purpose at all costs, and no statutory scheme encompasses just one element. Most relevant here, the Affordable Care Act displays a congressional preference for state participation in the establishment of Exchanges: Each State gets the first opportunity to set up its Exchange,
Worst of all for the repute of today’s decision, the Court’s reasoning is largely self-defeating. The Court predicts that making tax credits unavailable in States that do not set up their own Exchanges would cause disastrous economic consequences there. If that is so, however, wouldn’t one expect States to react by setting up their own Exchanges? And wouldn’t that outcome satisfy two of the Act’s goals rather than just one: enabling the Act’s reforms to work and promoting state involvement in the Act’s implementation? The Court protests that the very existence of a federal fallback shows that Congress expected that some States might fail to set up their own Exchanges. Ante, at 19. So it does. It does not show, however, that Congress expected the number of recalcitrant States to be particularly large. The more accurate the Court’s dire economic predictions, the smaller that number is likely to be. That reality destroys the Court’s pretense that applying the law as written would imperil “the viability of the entire Affordable Care Act.” Ante, at 20. All in all, the
IV
Perhaps sensing the dismal failure of its efforts to show that “established by the State” means “established by the State or the Federal Government,” the Court tries to palm off the pertinent statutory phrase as “inartful drafting.” Ante, at 14. This Court, however, has no free-floating power “to rescue Congress from its drafting errors.” Lamie v. United States Trustee, 540 U. S. 526, 542 (2004) (internal quotation marks omitted). Only when it is patently obvious to a reasonable reader that a drafting mistake has occurred may a court correct the mistake. The occurrence of a misprint may be apparent from the face of the law, as it is where the Affordable Care Act “creates three separate Section 1563s.” Ante, at 14. But the Court does not pretend that there is any such indication of a drafting error on the face of §36B. The occurrence of a misprint may also be apparent because a provision decrees an absurd result—a consequence “so monstrous, that all mankind would, without hesitation, unite in rejecting the application.” Sturges, 4 Wheat., at 203. But §36B does not come remotely close to satisfying that demanding standard. It is entirely plausible that tax credits were restricted to state Exchanges deliberately—for example, in order to encourage States to establish their own Exchanges. We therefore have no authority to dismiss the terms of the law as a drafting fumble.
Let us not forget that the term “Exchange established by the State” appears twice in §36B and five more times in other parts of the Act that mention tax credits. What are the odds, do you think, that the same slip of the pen occurred in seven separate places? No provision of the Act—none at all—contradicts the limitation of tax credits to state Exchanges. And as I have already explained, uses of
V
The Court’s decision reflects the philosophy that judges should endure whatever interpretive distortions it takes in order to correct a supposed flaw in the statutory machinery. That philosophy ignores the American people’s decision to give Congress “[a]ll legislative Powers” enumerated in the Constitution.
Trying to make its judge-empowering approach seem respectful of congressional authority, the Court asserts that its decision merely ensures that the Affordable Care Act operates the way Congress “meant [it] to operate.” Ante, at 17. First of all, what makes the Court so sure that Congress “meant” tax credits to be available everywhere? Our only evidence of what Congress meant comes from the terms of the law, and those terms show beyond all question that tax credits are available only on state Exchanges. More importantly, the Court forgets that ours is a government of laws and not of men. That means we are governed by the terms of our laws, not by the unenacted will of our lawmakers. “If Congress enacted into law
Even less defensible, if possible, is the Court’s claim that its interpretive approach is justified because this Act “does not reflect the type of care and deliberation that one might expect of such significant legislation.” Ante, at 14–15. It is not our place to judge the quality of the care and deliberation that went into this or any other law. A law enacted by voice vote with no deliberation whatever is fully as binding upon us as one enacted after years of study, months of committee hearings, and weeks of debate. Much less is it our place to make everything come out right when Congress does not do its job properly. It is up to Congress to design its laws with care, and it is up to the people to hold them to account if they fail to carry out that responsibility.
Rather than rewriting the law under the pretense of interpreting it, the Court should have left it to Congress to decide what to do about the Act’s limitation of tax credits to state Exchanges. If Congress values above everything else the Act’s applicability across the country, it could make tax credits available in every Exchange. If it prizes state involvement in the Act’s implementation, it could continue to limit tax credits to state Exchanges while taking other steps to mitigate the economic consequences predicted by the Court. If Congress wants to accommodate both goals, it could make tax credits available everywhere while offering new incentives for States to set up their own Exchanges. And if Congress thinks that the present design of the Act works well enough, it could do nothing. Congress could also do something else altogether, entirely abandoning the structure of the Affordable
Just ponder the significance of the Court’s decision to take matters into its own hands. The Court’s revision of the law authorizes the Internal Revenue Service to spend tens of billions of dollars every year in tax credits on federal Exchanges. It affects the price of insurance for millions of Americans. It diminishes the participation of the States in the implementation of the Act. It vastly expands the reach of the Act’s individual mandate, whose scope depends in part on the availability of credits. What a parody today’s decision makes of Hamilton’s assurances to the people of New York: “The legislature not only commands the purse but prescribes the rules by which the duties and rights of every citizen are to be regulated. The judiciary, on the contrary, has no influence over the purse; no direction of the wealth of society, and can take no active resolution whatever. It may truly be said to have neither FORCE nor WILL but merely judgment.” The Federalist No. 78, p. 465 (C. Rossiter ed. 1961).
* * *
Today’s opinion changes the usual rules of statutory interpretation for the sake of the Affordable Care Act. That, alas, is not a novelty. In National Federation of Independent Business v. Sebelius, 567 U. S. ___ (2012), this Court revised major components of the statute in order to save them from unconstitutionality. The Act that Congress passed provides that every individual “shall” maintain insurance or else pay a “penalty.”
Perhaps the Patient Protection and Affordable Care Act will attain the enduring status of the Social Security Act or the Taft-Hartley Act; perhaps not. But this Court’s two decisions on the Act will surely be remembered through the years. The somersaults of statutory interpretation they have performed (“penalty” means tax, “further [Medicaid] payments to the State” means only incremental Medicaid payments to the State, “established by the State” means not established by the State) will be cited by litigants endlessly, to the confusion of honest jurisprudence. And the cases will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.
I dissent.