The “Chevron Deference” and the Obamacare Challenge

June 15, 2015

Between now and the end of June, the U.S. Supreme Court will decide the fate of a major component of the Affordable Care Act, commonly known as Obamacare. The case is called King v. Burwell, and it’s about the tax credits Obamacare makes available to help lower- and moderate-income people buy health care insurance.

The challengers in King argue that tax credits are not available to people in states that didn’t set up their own health insurance exchanges, as Obamacare asked them to do. Those states—either thirty-four or thirty-seven of them, depending on how you count—are instead covered by the federally run exchange that operates as healthcare.gov. The challengers point to language in the Affordable Care Act that they say makes tax credits unavailable to people who buy on the federal exchange. The federal government points to other parts of the law that it says mean tax credits are available.

What the Supreme Court is supposed to decide this month, though, is not which side has the best reading of the statute, but whether the government’s reading is good enough—in legal terms, whether that reading is a “permissible construction” of what Obamacare requires. That’s because what the Court is actually reviewing in the case is a rule adopted by the Internal Revenue Service; that rule says premium credits are available to people who buy on the federal exchange.

Under a legal doctrine known as “Chevron deference,” courts are supposed to defer to interpretations of federal statutes by the executive branch agencies charged with administering them. Here, the word “defer” means that courts are supposed to let the agency’s interpretation of the law stand unless the statute itself points very clearly to a different interpretation. The idea is that agency staffs have expertise in the relevant subjects, and that Congress properly relies on those experts to fill in the details in the laws Congress passes. In this case, then, the challengers should win only if the Court decides that Obamacare, read as a whole, clearly makes the tax credits unavailable.

The consensus among Court-watchers is that the outcome in King will come down to Chief Justice John Roberts and, as controversial decisions often do, Justice Anthony Kennedy. Four other Justices seem likely to support the IRS’s interpretation, and three are likely to reject it. That means either Roberts or Kennedy could hand a win to the government, but it would take both of them to give the challengers a win. Neither Justice gave any clear indication of how he would vote, when the case was argued in early March.

If the challengers win, people in the states without their own exchanges will be ineligible for the Obamacare tax credits. Congress and the governments of those states would come under a lot of pressure to do something to help all those people afford insurance. Republicans, who have a majority in both houses of Congress, say they’re working on it, but they haven’t released any details yet. Meanwhile, some states are making plans to set up their own exchanges if necessary, but others show no inclination to do so. Look for a decision in the case by the end of June.

I’m Sean Anderson.