In today’s oral argument in King v. Burwell, Justice Kennedy repeatedly expressed concerns about the “serious constitutional problem” that would arise if the Court adopted the challengers’ reading of the exchange-subsidies provision—namely, that the resulting system would coerce states to create exchanges so that their residents would receive the federal subsidies needed to afford Obamacare-compliant insurance policies. (See Transcript 16:12-23, 18:7-17, 49:13-19.)
There are two very different ways that Kennedy’s concern might play out:
1. If Kennedy were to conclude that the meaning of “an Exchange established by the State under section 1311” is ambiguous, he might invoke the constitutional-doubt canon to resolve that ambiguity in favor of the Obama administration’s position (under which “an Exchange established by the State under section 1311” means “an Exchange”). That was how I first understood the live-blogging accounts of his remarks.
(The fact that eight states have filed an amicus brief expressly arguing that they prefer a regime with no exchange and no subsidies suggests that the challengers’ reading would not in fact create a serious constitutional problem.)
2. But if Kennedy concludes that the challengers are correct about the plain meaning of the contested phrase, then there would be no room for the constitutional-doubt canon to operate. Kennedy would instead vote in favor of the challengers, and he might highlight the possibility that a state could bring a lawsuit raising the constitutional-coercion claim.
(If such a future lawsuit were successful, the most sensible remedy would not be to judicially authorize billions of dollars of subsidies that Congress did not authorize, but instead to invalidate, in those states that choose not to establish exchanges, the insurance regulations that help make insurance unaffordable for some people in the absence of federal subsidies. And indeed, given the centrality of the insurance regulations and subsidies to the entire statutory scheme, striking them down might in turn require striking down all of Obamacare as inseverable from the Constitutional violation—which is exactly what Kennedy determined was the right option three years ago in NFIB v. Sebelius.)
Kennedy’s comments provide some hope for this second alternative. For example, he states that “the counsel for both sides should confront the proposition that [the challengers’] argument raises a serious constitutional question” (emphasis added) and that “It may well be that [the challengers are] correct as to these words, and there’s nothing we can do” to interpret them in a different way. (Transcript 18:7-17.) He also observes that the Solicitor General’s textual argument “seems to me to go in the wrong direction.” (Transcript 61:12.) And he suggests that a countervailing clear-statement canon ought to resolve any ambiguity in favor of the challengers’ reading (Transcript 74:16-75:9), as “it seems to me a drastic step for us to say that the Department of Internal Revenue and its director can make this call one way or the other when there are, what, billions of dollars involved here.” (Transcript 74:17-22.)