Why Are Some Legal Analysts So Surprised at the Supreme Court's Decision in King v. Burwell?

06/26/2015 02:28 pm ET | Updated Jun 26, 2016

In a surprising twist to many, the Supreme Court voted 6-3 in favor of the defendants in the landmark King v. Burwell case. This is good news for the millions of Americans who depend on federal subsidies to purchase health insurance on a health insurance exchange run by the federal government. Why? To put it simply: They get to keep their subsidies.

While it is good for these individuals and families, it is not good for their employers. Why not? Employers must pay hefty penalties if their employees get federal subsidies for individual coverage. No more subsidies for policies purchased on the federal exchange would have freed many employers from penalties.

Law Had Seemed to Give States the Freedom to Choose

The Affordable Care Act (ACA) had seemed to give states the freedom to choose whether or not they preferred that their citizens be able to get subsidies, or that their employers be able to avoid penalties. If a state wanted to be business-friendly, it would choose not to set up a state exchange. People would still be able to get health insurance regardless of pre-existing conditions, but they wouldn't be able to get subsidies and their employers wouldn't be liable for a penalty.

Why did analysts think that the law gave that freedom of choice to states? Because in more than one place, the law explicitly noted that subsidies would be available for policies purchased through a "state" exchange. It did not say that subsidies would be available for policies purchased through the federal exchange.

Judges generally use canons of construction, or guidelines for interpretation, when reading a law. A long-standing canon is "unius est exclusio alterius" (the expression of one thing is the exclusion of another) - a guideline used by judges when clarifying legislation on multiple entities in the same class. According to the principle, if the law expressly names provisions that apply to one item, they should not be applied to the other item if they are not mentioned.
And that had seemingly been the case here. Subsidies were mentioned for state exchanges but not for the federal exchange. Per "unius est exclusio alterius," subsidies should not be applied to the federal exchange.

This issue had been understood for a long time. Professor James Blumstein from Vanderbilt University, for example, testified to Congress about it on September 12, 2012. (Note: Professor Blumstein was a professor of mine in law school).

This is why the Court's ruling is a surprise to so many analysts. Many would argue that giving the states the freedom to make decisions like this is part of what makes the U.S. so great. No matter the intelligence of our policymakers, the actual outcome of a policy is difficult to predict. Giving states the freedom to try different approaches allows for better learning and more effective policy-making in the long-term. With the Supreme Court's ruling, however, states will not have the freedom to choose between being business-friendly or subsidy-friendly.

Many Positives from the Court's Ruling

Despite that loss, there are a lot of benefits from the Court's ruling. Besides individuals keeping their subsidies, the ruling is also good news for hospitals across the country. Had the court ruled differently, it's possible that many patients would have decided to drop their health insurance plans, forcing hospitals to absorb the costs of care for the uninsured. According to the U.S. Department of Health and Human Services, hospitals provided more than $50 billion in uncompensated care in 2013 -- a number that is down from years past in part due to Medicaid expansion and the ACA. Likewise, insurance companies can also worry less about possibly losing customers who would have lost their subsides had the ruling gone the other way.

There will be more lawsuits, but it is looking more and more like health care providers, employers, families and individuals can plan with confidence that the ACA is here to stay.