Bench Memos

Halbig v. Sebelius, Part 3: The Whole Act Canon and the Constitution

In the third and final post of my three-post series about Halbig v. Sebelius (see Part 1 and Part 2) a lawsuit challenging unlawful Obamacare tax regulations promulgated by the IRS, I’ll summarize our amicus brief, which we recently filed on behalf of several members of Congress.

As I noted in my first post, the starting point for the interpretive task is the text of the Affordable Care Act itself, and the text creating the tax subsidy for exchange-bought health plans is unambiguous and perfectly clear: It applies to exchanges “established by the State under [Section] 1311 of the Patient Protection and Affordable Care Act.” In my second post, I explained the government’s argument and the district court’s opinion, which simply got it wrong.

Now, much federal legislation is imperfect, as anyone familiar with reading statutes will tell you. As a general rule, the Supreme Court has held that the interpretation of imperfect legislation requires a holistic view of the statute at issue. Nevertheless, under well-established principles of statutory interpretation, the text still governs unless the plain language would lead to absurd consequences.

The district court erroneously accepted the government’s argument that restricting the tax subsidy to exchanges established by a state (as the statute says) would lead to absurdity. In fact, there is ample evidence that Congress wanted to create incentives for states to create their own exchanges, since the Constitution forbids Congress from forcing the states to do so on their own. Incentives are clearly not an “absurd” result.

And this raises another important issue: At the government’s urging, the district court tried to create a textually harmonious interpretation of the ACA, that is, one that avoided all possible anomalies. But this approach is at odds with the typical principle that, in large, convoluted statutes such as the ACA, Congress often means different things when using the same words (we cite several examples in our brief). The district court’s opinion assumes a level of harmony in the statute that nobody who has ever read a large piece of legislation like the ACA should expect it to have.

Moreover, as we note in our brief, the language at issue originated with a Senate bill that was largely trying to strip the ACA of federal involvement. The bill passed the Senate and went to the House, but before the House and the Senate could agree on amendments that would pass both houses, Senator Scott Brown replaced Senator Ted Kennedy, altering the political balance. The bill that Congress passed under these circumstances reflects this balance of power.

These factors make adherence to the plain statutory language that much more important, lest the courts amend the ACA by substituting their own policy judgment for that of Congress. The Constitution, after all, vests the lawmaking power with Congress, not the courts or the IRS. By adopting the IRS’s general explanation of how the scheme should work, the district court effectively amended the ACA by giving the pro-federalization political forces a victory that they did not achieve through the political process.

We also raise the point that if the court concludes that the statute doesn’t mean what it says, then it would be, frankly, bizarre for the district court to conclude that the provision is unambiguous. Indeed, if the best interpretation of “established by the State under section 1311” is that it refers to exchanges established by the federal government under section 1321 of the law, then the better course is to declare the provision ambiguous and allow for a differing interpretation in the next administration.

That concludes the series on Halbig v. Sebelius. We will continue to follow this important case and note further developments. As the English say, watch this space.

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