King v. Burwell and the Validity of Federal Tax Subsidies Under the Affordable Care Act
Set for oral argument on March 4, 2015, King v. Burwell brings to the Supreme Court yet another challenge to the Affordable Care Act (ACA). The King plaintiffs cite 26 U.S.C. § 36B to attack the validity of certain federal health insurance subsidies provided by the Internal Revenue Service (IRS) through the ACA. Specifically, because § 36B authorizes subsidies for low-income taxpayers who purchase health insurance from an “Exchange established by the State,” the plaintiffs allege that such subsidies are not valid on exchanges operated by the federal government where the states refused to operate a state-sponsored exchange. Given that the federal government operates exchanges in thirty-four states, the Supreme Court's ruling will potentially affect nearly ten million taxpayers nationwide.
Professors Eric Segall and Jonathan Adler debate the merits of King v. Burwell, and each suggests how the Court should rule. Professor Segall argues that the Court should follow the IRS's interpretation of § 36B—namely, that federal tax subsidies are available in a state with a federally operated exchange, because the law allows the federal government to operate the “Exchange established by the State.” Professor Segall emphasizes that Chevron deference requires the Court to defer to the IRS interpretation. In response, Professor Adler contends that Chevron deference is unnecessary because the statutory language is clear: an “Exchange established by the State” cannot be an exchange established by the Department of Health and Human Services. Professor Adler argues that, given the unambiguous language in the statute, the Court need not defer to the IRS interpretation and should rule for the plaintiffs.
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