Thoughts on King v. Burwell

By Professor Brietta Clark

Today the Supreme Court, in a 6-3 decision in King v. Burwell, held that subsidies (or tax credits) are available to help consumers buy insurance, whether they purchase insurance on a State or Federal Exchange. In upholding this critical piece of the Affordable Care Act (ACA), the Court interpreted the law in a way that is most faithful to Congress’s goals of making insurance more affordable and of ensuring the availability of meaningful insurance offerings in the market. Practically, this decision is important because consumers in states that have resisted reform efforts are already suffering from the failure of these states to expand Medicaid; by holding that the ACA authorizes subsidies on a Federal exchange, the Supreme Court has preserved at least one important avenue for increased health care access in these states. But health reform proponents are not only happy about what the Court decided; they are relieved because of how the Court came to its decision.

The issue in the case – whether subsidies would be available for consumers purchasing insurance on a Federal exchange – turned on a question of statutory interpretation. Petitioners challenged the IRS rule authorizing the subsidies as inconsistent with the Affordable Care Act. Specifically, they pointed to language in a provision in the Act, now Section 36B of the Internal Revenue Code, which defines the premium assistance credit amount by referring to an insurance plan that is enrolled in through “an Exchange established by the State….” Petitioners insisted that this text only authorizes subsidies for use on state-run exchanges, but does not authorize them for use in states that have a Federal exchange. Government officials defended the IRS rule by arguing that the relevant language must be read within the context of the statute as a whole, and that based on this, it was clear that Congress intended to make subsidies available for use on State and Federal exchanges.

The Court ultimately upheld the IRS rule, but it could have done so based on two different lines of reasoning. It could have followed the reasoning of the Fourth Circuit Court of Appeals. The Fourth Circuit found that the petitioners’ and government’s interpretations were both plausible based on the statutory text and its relationship with other provisions in the statutory scheme, which created an ambiguity in the law. It then applied Chevron deference – a doctrine that says courts should defer to an agency’s interpretation of an ambiguous statute as long as that interpretation is reasonable.

The problem with this approach, however, is that it leaves the interpretation of the law, and thus the availability of subsidies, up to an administrative agency subject to the direction of the President. This means that some future administration would potentially have the power to reverse this decision, by issuing a new ruling that tax credits are no longer authorized for use on the federal exchange.


Instead, the Supreme Court took a different approach. The Court agreed that the statutory text when read along with related provisions in the Act created an ambiguity; but it did not apply the Chevron doctrine and did not defer to the IRS’s interpretation. The Court clarified when Chevron deference should apply:

[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...In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation. This is one of those cases.

The Court went on to conclude that Congress could not have intended an implicit delegation on a question of such “deep ‘economic and political significance’ that is central to the statutory scheme [because] had Congress wished to assign that question to an agency, it surely would have done so expressly.”

The Court explained that it is instead the Court’s task to determine the correct reading of the statute, by reading the text in its context and with a view to its place in the overall statutory scheme. The Court ultimately decided that the statutory scheme compelled them 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.” This approach cements this interpretation in the ACA and binds administrative agencies responsible for its implementation. Thus future administrations will not be able to take these subsidies away without Congressional action.