The primary basis for the Chief Justice’s decision is that a “fair construction” of the statute requires more than giving meaning to discrete phrases, so “established by the State” need not mean “established by the State” insofar as such an interpretation — given the intervening decision of several dozen states not to establish their own exchanges — would produce untoward effects that Congress would not have intended or wanted when it enacted the PPACA. Specifically, the Chief Justice argued, insfoar as an interpretation of the PPACA would undermine the statute’s goals — such as by creating a “death spiral” of increasing costs and declining coverage — it is the Court’s job to avoid it. That the phrase “established by the State” was added to multiple places in the relevant statutory provision (Section 1401) at multiple times is immaterial. “Established by the State” need not exclude an exchange established by the federal government. The majority opinion shows no sympathy for the Solicitor General’s silly argument that “established by the State” was an undefined “statutory term of art.” No matter, for the government wins anyway.
The Chief Justice concluded that the tension between the statutory text and the the statute’s structure and purpose rendered the statute ambiguous. Under normal circumstances, this would mean the government wins under step two of the Chevron doctrine, which provides that when a statute is ambiguous, courts should defer to the interpretation of the implementing agency. Not here. Instead, the Chief Justice explained, resolving the ambiguity was the job of the Court. Here’s the relevant passage:
When analyzing an agency’s interpretation of a statute, we often apply the two-step framework announced in Chevron, 467 U. S. 837. Under that framework, we ask whether the statute is ambiguous and, if so, whether the agency’s interpretation is reasonable. Id., at 842–843. 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.” FDA v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 159 (2000). “In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.” Ibid.This is one of those cases. The tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people. Whether those credits are available on Federal Exchanges is thus a question of deep “economic and political significance” that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly. Utility Air Regulatory Group v. EPA, 573 U. S. ___, ___ (2014) (slip op., at 19) (quoting Brown & Williamson, 529 U. S., at 160). It is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort. See Gonzales v. Oregon, 546 U. S. 243, 266–267 (2006). This is not a case for the IRS.It is instead our task to determine the correct reading of Section 36B. If the statutory language is plain, we must enforce it according to its terms. Hardt v. Reliance Standard Life Ins. Co., 560 U. S. 242, 251 (2010). But oftentimes the “meaning — or ambiguity — of certain words or phrases may only become evident when placed in context.” Brown & Williamson, 529 U. S., at 132. So when deciding whether the language is plain, we must read the words “in their context and with a view to their place in the overall statutory scheme.” Id., at 133 (internal quotation marks omitted). Our duty, after all, is “to construe statutes, not isolated provisions.” Graham County Soil and Water Conservation Dist. v. United States ex rel. Wilson, 559 U. S. 280, 290 (2010) (internal quotation marks omitted).
So the Court resolves the ambiguity in favor of the federal government, but without applying Chevron deference. Further, it resolves the ambiguity not by choosing one permissible interpretation of the permissible text over another, but by deciding that some portions of the text — the repeated invocation of “established by the State” has no meaning whatsoever.
If there’s any consolation in the Chief Justice’s opinion, it is that it seems to try to revive the Chief Justice’s dissent in City of Arlington v. FCC, which sought to constrain the application of Chevron deference. Constraining Chevron to cases in which it would be reasonable to believe that Congress meant to delegate interpretive authority to the agency would be a good idea, but I am not sure there is enough in this decision to establish that principle, let alone to overturn Justice Scalia’s City of Arlington opinion, but we’ll have to see whether lower courts see it that way. For more on King and Chevron, see Chris Walker’s post here.
At a practical level, the decision provides the Administration with substantial flexibility in implementing the statute. Although (as noted above) the decision cuts back on the scope of Chevron deference, lower courts will undoubtedly read this decision as a green light for further administrative jiggering of the statutory text (of which there has been quite a bit).
Another practical impact of the decision may be the erosion of the state-based exchange model. As many states discovered to their chagrin, creating and operating exchanges is not easy. It’s a costly administrative headache. Yet if there is no downside to refusing to create an exchange, many states will happily turn over exchange responsibilities to Healthcare.gov. So, even though PPACA supporters promised that the law would not result in a “federal takeover” of health insurance regulation because “all the health insurance exchanges . . . are run by states,” the Administration’s victory in King is likely to result in even fewer state exchanges.
Just as the Chief Justice rewrote the individual mandate into a tax, and rewrote the Medicaid expansion to sever it from traditional Medicaid, the Chief Justice has rewritten Section 36B of the Internal Revenue Code to excise the repeated reference to exchanges “established by the State.” Justice Scalia, in dissent, said Obamacare should now be known SCOTUSCare. Whatever we call it, the PPACA is now, in many respects, the law that Chief Justice John Roberts wrote.
These are my initial thoughts on the case. Prior posts on King v. Burwell can be found here. I’m sure I’ll have more to say later.
UPDATE: Here is audio of a podcast on the decision I recorded with Josh Blackman and David Rivkin for the Federalist Society this afternoon.