First: This case developed the Chevron test for the validity of an agency regulation. The court will look at the statute authorizing that agency to make the regulation to see if there is an ambiguity in it. If the statute is unambiguous, then the agency must follow the unambiguous will of Congress. If there is an ambiguity, and if the agency's interpretation of the statute is plausible, then the court will defer to its interpretation.
Second: This approach is widely seen as necessary for the whole regulatory state to exist. If the courts claimed that their interpretation of a statute supersedes the agency interpretation, then agencies could be paralyzed, never knowing if their regulations will be overridden.
There are at least two rationales for this, One is that the courts are generalists, interpreting all statutes, while regulatory agencies are specialists who interpret only one statute and therefore have greater expertise in their narrow area than courts. The other is political. In the case of Chevron, for instance, the EPA had changed its regulations (and, by implication, its statutory interpretation) when Reagan replaced Carter in the White House. The theory is that regulatory policy changes with who was most recently elected President, and the courts should defer to the people's will, as embodied by presidential policies.
King v. Burwell turns on a phrase in the Affordable Care Act (ACA, the official name for Obamacare) that makes subsidies available to people buying health insurance on an "exchange established by the states." There is no mention of the federal government. However, the IRS (which administers the subsidies) passed a regulation allowing subsidies on federal exchanges as well. So the question is whether the statute is ambiguous as to where it allows subsidies and, if so, is the IRS interpretation reasonable. Going by that single phrase, the statute appears to unambiguously limit subsidies to purchases on state exchanges. But things are not that simple. Also taken into account is the context of the phrase in the complete statute, the purpose of the statute, and legislative history to determine legislative intent. And if the phrase in isolation appears to limit subsidies to state exchanges, the broader statute, its general purpose, and legislative history all point in the opposite direction.
All of which means the Supreme Court has three main options:
- It can say the statute is ambiguous and the IRS interpretation is plausible, so subsidies are allowed on federal exchanges.
- It can say that the statute unambiguously limits subsidies to policies purchases on a state exchange.
- It can strike down Chevron altogether and say that from now on, court interpretation of statutes trumps regulatory agency interpretation.
Since many right winger/libertarians in this country (including some on the Supreme Court) see our whole regulatory state as constitutionally and morally illegitimate, this might look like a fine opportunity to destroy it altogether. But the general consensus is that the regulatory state is too well entrenched to overthrow at a single stroke, so the Supreme Court would stop short of that, much as it might be tempted.
So I can make a pretty good guess what seven of the nine Supreme Court justices will say in King v. Burwell.
The liberal contingent (Ginsburg, Breyer, Sotomayor and Kagan) will hold that the statute is ambiguous and the IRS interpretation is plausible, so people buying insurance on federal exchanges can keep their subsidies.
Scalia and Thomas will call for overturning Chevron altogether and striking a death blow to the unconstitutional and immoral regulatory state. Scalia will say this because he knows he is outvoted and there is no chance of his measure actually passing. Thomas, by contrast will be completely serious. Regulatory agencies were not part of the state at the time the Constitution has passed; the Constitution was never amended to allow such agencies; therefore they must go, consequences be damned.
Alito will uphold Chevron but say that the statute unambiguously limits subsidies to state exchanges. This is a longstanding game the Supreme Court conservatives have. Roberts, Alito and usually Kennedy vote in favor of the conservative policy preference, but limit their opinion to the case at hand and avoid sweeping implications. Scalia and Thomas like to issue opinions that reach the same conclusion on the issue at hand to Roberts and Alito but have sweeping policy implications. Being sure you are outvoted can do that.
The judges I can't place are Roberts and Kennedy. They may join with Alito. Or they may rule that Congress unambiguously intended withhold subsidies from federal exchanges in order to coerce states into making exchanges, but the attempt was unconstitutional because Congress failed to give the states adequate notice. That will be a brilliant way to square the circle and mask a substantive defeat as a procedural victory. It will accept the Republican interpretation of the statute and declare part of Obamacare unconstitutional, but avoid the messy consequence of stripping millions of their subsidies and putting Congressional Republicans on the spot to do something about it.
But I am inclined to think that one or the other will join Alito. There were, after all, four votes to hear King, which almost certainly means four votes against the subsidies. The fifth vote (whether Kennedy or Roberts) is the real wild card.
Follow up question: Suppose the Supreme Court upholds the IRS regulation. What is to keep our next Republican President from issuing an IRS regulation limiting subsidies to state exchanges? Politics, basically. The overall lessons of the last six years of gridlock are as follows:
- People give the President credit or blame for just about everything that happens on his watch.
- In case of gridlock and obstruction between the President and Congress, people blame the President.
- If Congress tries to force something over and there is a showdown, people side with the President and blame Congress.
- If problems obviously started under his predecessor, people will give the President a certain grace period to get it right.
Now if a new President comes to power and issues a new IRS regulation stripping millions of their health insurance, that decision will be unpopular. And everyone will know who to blame.