As you have no doubt heard, two circuit courts issued divergent opinions yesterday on the same administrative law question, namely the validity of an IRS rule extending tax subsidies to health insurance purchased on the federal exchange. These decisions nicely illustrate the point I was making in my last post regarding the nature of administrative law decisions and the extent to which a decision on the merits of the employer mandate delay would or would not vindicate the House’s constitutional interests.
In Halbig v. Burwell, the D.C. Circuit held the IRS rule invalid because it conflicts with the unambiguous language of the Affordable Care Act, particularly section 36B, which authorizes tax subsidies only for insurance purchased on “an Exchange established by the State.” The government argued that the statute taken as a whole reveals Congress’s intent that subsidies be available on both the federal and state exchanges. Any other conclusion, it contended, would generate an absurd result and be inconsistent with the ACA’s purpose and legislative history. Judge Griffith, writing for himself and Judge Randolph, found that the government’s arguments were insufficient to overcome the clear statutory text.
On the other hand, in King v. Burwell, the Fourth Circuit held that the language of the ACA, taken as a whole, was ambiguous on the question of whether tax subsidies applied to the federal exchange. The court acknowledged that the plaintiffs’ position made a “certain sense” and “accords more closely” with “a literal reading of the statute,” but after reviewing all relevant statutory provisions as well as the ACA’s structure, purpose and legislative history, it concluded that “we are unable to say definitively that Congress limited the premium tax credits to individuals living in states with state-run exchanges.” Instead, the court applied Chevron deference to the statutory interpretation adopted by the IRS in its regulation, thus upholding the agency’s decision to extend tax subsidies to insurance purchased on the federal exchange.
The two courts therefore reached different conclusions, but the various judges who have weighed in on the controversy (so far) reflect more than two views. The D.C. Circuit majority thought the ACA unambiguously prohibited the IRS from extending tax subsidies to insurance bought on the federal exchange. The Fourth Circuit majority, along with Judge Edwards dissenting in Halbig, thought that the ACA did not resolve the issue one way or the other and that the IRS was therefore free to determine whether or not tax subsidies should apply on the federal exchange. However, Judge Davis, concurring in King, found that Congress did resolve the question in the ACA and that the IRS was therefore required to adopt the interpretation that it did. And none of the judges appeared to agree with Judge Friedman, the lower court judge in Halbig, who found that the ACA unambiguously supported the IRS’s position.
In his Rules Committee testimony, Professor Turley cited the tax subsidy issue in Halbig as an example of Congress addressing an issue with a “lack of ambiguity” and the administration deciding to change Congress’s policy decision through a regulation. Turley expressed the hope that by bringing such cases to the courts, the House could obtain some sort of clear demarcation of congressional versus executive authority. Certainly the results in Halbig/King so far suggest this is a forlorn hope.
Even if a majority of the Supreme Court ultimately invalidates the IRS regulation, I don’t see that such a decision would expand or protect congressional power in some fundamental way. No one disputes that Congress could have resolved the issue through the ACA; the question is simply whether it did so. Indeed, it is arguable that the Halbig/King cases will expand executive authority by applying Chevron deference to an IRS determination that may not deserve it.
Just as importantly, even Judge Griffith’s opinion does not address, at least in any kind of direct way, the House’s constitutional concern that President Obama is failing to take care that the laws be faithfully executed. The D.C. Circuit concludes that the plaintiffs have the “better of the argument” as the tax subsidy issue, but it does not suggest that IRS (much less the President) promulgated the regulation in bad faith.
In sum, if the House were to sue regarding the employer mandate delay, the best it could hope for would be a court decision holding that delay to be invalid. But as I mentioned before, courts invalidate agency regulations all the time. How would one more such ruling change the balance of power between the branches?