An Obamacare Cliff-Hanger at the Supreme Court

Oral arguments before the Justices offer clarity on the legal issues, but the law's fate is less certain than ever.

What if you had a ticket to the apocalypse and a legal argument broke out instead?

That in essence was what happened at the Supreme Court Wednesday, at the long-awaited oral argument for King v. Burwell, the new challenge to the Affordable Care Act. This case is as crucial to the success or failure of the ACA as National Federation of Independent Business v. Sebelius, the 2012 decision that preserved the individual mandate. But the atmosphere at 1 First Street NE this time could hardly have been more different. The justices were civil and low-key. The argument turned on issues of law rather than on broccoli. When the hour ended, no one felt sure which way the Court would go.

The argument concerns four sections of the massive statute. Section 1501 is the “individual mandate,” which requires heads of households to obtain health insurance or pay a tax. Section 1311(b)(1) instructs that states “shall” set up “American Health Benefit Exchanges” so that their residents can find individual insurance companies to fulfill the mandate. Those individual policies would be prohibitively expensive; so Section 1401 instructs the Internal Revenue Service to provide tax credits and subsidies for millions of low- and middle-income taxpayers. If they buy policies on “an Exchange established by the State under 1311,” the credits and subsidies defray much of the cost. But it’s black-letter law that the federal government can’t order states to perform an internal act like setting up an exchange; Section 1321 addresses the situation. If a state refuses, the federal government shall “establish and operate such Exchange within the State.” In the end, 34 states decided to let the federal government do the exchange for them.

The challengers argue that the words “established by the state under 1311” mean that subsidies flow only to residents of states that actually establish an exchange; indeed, they suggest, the federal exchanges can probably not even enroll anyone, and the Internal Revenue Service can’t pass along the Act’s subsidies.

The stakes are enormous. Predictions abound that a defeat for the government will lead in short order to a “death spiral” in the insurance markets of the 34 federal-exchange states, crippling the nation’s health insurance companies—as well as depriving at least 7 million people of the insurance they bought on ACA “exchanges” during the open enrollment period that ended February 15.

Not even Michael Carvin, the lawyer who concocted the challenge, disagreed with those predictions. But Solicitor General Donald Verrilli said remarkably little about impending doom.

The problem for Verrilli is that the sky-will-fall argument may very well make his case weaker, not stronger. For one thing, I suspect that the Justices are sick of hearing about how they must decide in favor of the government or else doom women and children to die without health-care. The practical consequences of a decision are always important; but emphasizing them too strongly may feel less like argument than like pressure—or even threats.

For another, the Act’s opponents have come up with a glib counterargument. If a loss for the government will be that all-fired bad, it runs, then the political system will fix it right away. The Act’s two most tenacious opponents were Justices Antonin Scalia and Samuel Alito, and they tag-teamed Verrilli with that claim. “[I]t's not too late for a state to establish an exchange if we were to adopt petitioners' interpretation of the statute,” Alito said. “So going forward, there would be no harm.”

Verrilli responded that setting up an exchange takes time and requires multiple stages of federal approval. The deadline for an exchange that could begin next tax year is May—well before the result in King will even be known. Oh, said Alito airily, the Court could “stay the mandate until the end of this tax year.” Problem solved.

Justice Scalia jumped in to suggest that trusty ol’ Congress will act if the states don’t. “You really think Congress is just going to sit there while—while all of these disastrous consequences ensue,” he said sarcastically.

“Well, this Congress, Your Honor…” Verrilli answered, provoking laughter.

“I don't care what Congress you're talking about,” Scalia snapped. “If the consequences are as disastrous as you say, so many million people without—without insurance and whatnot, yes, I think this Congress would act.”

If he really thinks that, he was the only person in the room. Everyone else knows the basic fact of politics 2015—the Republican Congress would burn the Capitol before they save Obamacare with a quick wording fix.

Verrilli nailed the government’s colors to one argument: There is no ambiguity in the statute; the text says and means that every exchange, state or federal, qualifies its customers for subsidy. As Justice Stephen Breyer put it early in the challenger’s argument, 1311 says states “shall” establish an exchange. The statute says “’[t]he Secretary is to establish and operate such Exchange,’” Breyer added. “The only kind of Exchange to which the Act refers, which is an ­­quote, ‘an Exchange established by a State under 1311.’ That's the definition.  ... So that’s throughout what they’re talking about. So what’s the problem?”

Michael Carvin, arguing for the challengers, responded that the difference between a state and a federal exchange is “what the statute turns on,” and so the words of 1401 bar funding for federal exchanges. The challengers have established a complete counter-narrative to explain why Congress would have done this: to punish states who did not set up exchanges by depriving their people of health insurance.

This “punish the states” argument led Carvin onto thin ice indeed with Justice Anthony Kennedy, the Court’s most sincere federalist. “If your argument is accepted,” he told Carvin, “the States are being told ‘either create your own Exchange, or we'll send your insurance markets into a death spiral.’ ... [T]here’s a serious constitutional problem if we adopt your argument.”

Carvin replied that the government hadn’t made that argument. (In fact, the federalism argument had been made by many amicus briefs.)

“Sometimes we think of things the government doesn’t,” Kennedy replied.

Unlike Scalia, Breyer, Alito, Sotomayor, or Kagan, Kennedy doesn’t come to oral argument to bat ideas around. His questions are few, and usually expresses what is really on his mind. He had difficult questions for Verrilli as well, but the “serious constitutional problem” language was not a good sign for Carvin.

The advocates were a study in contrasts. Verrilli was confident and smooth as butter. He took great care not to sound as if he were pressuring the Court. Carvin, by contrast, was a walking compendium of the things I tell students not to do in oral argument. He waved his finger; he raised his voice; he insulted the government’s lawyers; he refused to allow female Justices to interrupt him. (Justice Kagan finally lost patience when he talked over her for the fourth time. “Wow,” she said. “You’ve been talking a long time.”) In a recent interview with The Wall Street Journal, Carvin compared himself to Atticus Finch, the heroic lawyer in To Kill a Mockingbird; but on Wednesday he seemed less like Gregory Peck’s Finch than like Matthew Harrison Brady, the bombastic prosecutor played by Frederic March in Inherit the Wind.

At argument’s end, many in the courtroom felt the case was truly hanging in the balance. Scalia and Alito are on board with the challengers (and thus Thomas probably as well); Kennedy seems to be mulling his options; and Roberts gave absolutely nothing away. I emerged thinking that either side could win, and that both sides got a fair and civil hearing.