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High Court Justices Weigh Arguments Over Health-Law Provision

The U.S. Supreme Court heard extended arguments on Wednesday over a key provision of the Affordable Care Act that is being watched by educators.

There was no clear indication from their questions how the justices would rule on whether the Obama administration is legally allowing tax subsidies to go to individuals in the more-than 30 states that have refused to establish their own health insurance exchanges.

The case of King v. Burwell (No. 14-114) is being watched in education circles largely for its impact on school district employee-benefits policies. A group of Indiana school districts that is challenging the so-called employer mandate filed a friend-of-the-court brief on the side of four Virginia individuals who say they would be harmed by the ACA. Meanwhile, the National Education Association filed a brief in support of the law because the ACA has expanded health care to more Americans, among other reasons. (I wrote this preview in Education Week.)

The Virginia individuals say that because their state does not have its own exchange, the combination of the law's individual mandate to acquire insurance and the availability of tax subsidies through the federal Healthcare.gov exchange would put them in a position to pay at least some amount out of pocket for coverage they don't want. Their suit challenges Internal Revenue Service rules that provides the subsidies to those individuals participating through the federal exchange.

One of the individuals, Brenda Levy of Richmond, Va., is a substitute teacher. One of the first questions the high court dealt with on Wednesday was whether she and the other individual challengers have legal standing, since questions were raised relatively late in the game about whether they might be eligible instead for veterans' coverage or Medicare.

Michael A. Carvin, the lawyer representing the individuals challenging the ACA provision, told the justices that even though Levy will turn 65 this year, she still faced the prospect of penalties for not having health coverage in 2014.

U.S. Solicitor General Donald B. Verrilli Jr. said the questions about the standing of the challengers was significant, and the court could decide on its own whether it presented an obstacle to deciding the merits of the case. But it was a less-than-full-throated attack, and the advocates and justices soon moved to the merits.

"The only provision in the [ACA] which either authorizes or limits subsidies says, in plain English, that the subsidies are only available through an 'exchange established by the state under Section 1311,'" Carvin said.

Justices Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotomayor were the most aggressive in questioning Carvin about the challenge, which hinges on an interpretation of just a few words in the statute.

"It's not a simple four or five words" of the statute that should be the focus, Kagan told him. "It's the whole structure and context of the provision."

Verrilli said that the challengers' reading of the text "produces an incoherent statute that doesn't work."

"It makes a mockery of the statute's express textual promise of state flexibility," the solicitor general said. "And of course it revokes the promise of affordable care for millions of Americans. That cannot be the statute that Congress intended."

Justices Antonin Scalia and Samuel A. Alito Jr. were most aggressive in questioning Verrilli.

Scalia said the ACA—"not the most elegantly constructed statute," as he put it—probably has numerous "ill-considered" provisions, and Congress could be expected to step in and fix the law if the IRS rules are struck down.

"This Congress?" Verrilli replied, as a courtroom packed with several high-ranking U.S. senators and representatives laughed at the reference to congressional gridlock.

Justice Anthony M. Kennedy several times expressed concerns about federalism, including a counterintuitive idea that Carvin's reading of the law would create such a problematic situation for the states that didn't establish their own exchanges that it makes the provision unconstitutional.

Carvin distinguished the ACA's funding mechanism from that of the federal No Child Left Behind Act, which imposes a regulatory scheme on the states that accept federal funds. (It was a quick point that he didn't have time to elaborate on.)

Chief Justice John G. Roberts Jr., who provided the pivotal vote in 2012 to upheld the ACA's individual mandate, remained quieter than usual during the argument, which he extended from the originally scheduled hour to nearly 90 minutes.

A decision is expected by late June.

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