Halbig and the ACA’s Peculiar Legislative History

By Jeremy Kreisberg

Professors Nicholas Bagley and Jonathan Adler had a very interesting discussion on Halbig v. Sebelius — the case challenging the legality of offering premium tax credits through federally facilitated exchanges (about which I have written previously here and here) — in a recent Federalist Society Podcast.  One particularly intriguing question that emerged concerned the peculiar legislative history of the ACA, and what role that should play in how courts read the text of the law.

As Professor Abbe Gluck has summarized well, the text of the ACA features some sloppy drafting errors, largely due to the manner in which the bill became law:

[T]he ACA is a very badly drafted statute.  And it’s badly drafted for a simple reason that turns out to be important to understanding how the pending litigation should be resolved:  Because Senator Ted Kennedy died in the middle of the legislative process and was replaced by Republican Scott Brown, the statute never went through the usual legislative process, including the usual legislative clean-up process. Instead, because the Democrats lost their 60th filibuster-preventing vote, the version that had passed the Senate before Brown took office, which everyone initially had thought would be a mere first salvo, had to effectively serve as the final version, unchangeable by the House, because nothing else could get through the Senate.  In the end, the statute was synthesized across both chambers by an alternative process, called “reconciliation,” which allows for only limited changes but avoids a filibuster under Congress’s rules.

I think it’s fairly clear that the D.C. Circuit in Halbig (and the 4th Circuit in King) are encountering one such sloppy drafting error.  Without any meaningful legislative history suggesting that tax credits would be denied to citizens in states with a federally facilitated exchange, the ACA authorizes tax credits for individuals purchasing insurance on an “Exchange established by the State.”  While the provision of the law instructing HHS to create federally facilitated changes requires the Secretary to “establish and operate such Exchange within the State” (i.e., the state exchange), the challengers argue that the words “established by the State” in the tax-credit provision preclude an interpretation of the law that allows for tax credits to flow through federal exchanges as well.

The reason I call this “sloppy drafting” rather than a purposeful command is that, aside from the striking lack of historical support for an interpretation denying tax credits on federally facilitated exchanges, this interpretation would be nonsensical when read into the law as a whole.  To take only one of many examples, section 1312 of the ACA defines qualified individuals (i.e. those people who can purchase health insurance through an exchange) as individuals “who . . . resides in the State that established the Exchange.”  If “established” holds the exclusive meaning that the challengers in Halbig say it does, there could never be a qualified individual in the states with federally facilitated exchanges because the State didn’t “establish the Exchange” in the State in which these individuals reside.  In other words, nobody could purchase insurance through a federally facilitated exchange because nobody would be qualified.  This would leave the federally facilitated exchanges with no purpose.  As Judge Friedman found in federal district court, conventional canons of statutory interpretation should preclude such an absurd reading of the law.

The challengers seemingly have other ideas.  They view the text in the tax-credit provision as so clear that any other reading cannot be tolerated.  Incidental to this view seems to be a suggestion that, despite any possible difficulties this reading may carry, that is simply the price Congress (and their constituents) should pay for the Democrats’ decision to forego a conference committee and use reconciliation instead.  On this view, a strict textual reading of the law is even more necessary when Congress hasn’t spoken clearly because it is harder to discern consistent purposes.  And the court should enforce the strict text in cases like this because it will deter future Congresses from using similar techniques that risk unclear statutory text.

As legal readers surely know, this argument tracks quite a rich debate in legal scholarship over statutory interpretation — that between textualism and purposivism.  I certainly do not mean to rehash this debate in an ~800 word blog post.  But I do think the argument for a strictly textual approach to statutory interpretation is actually quite weak in situations where a less-than-ideal drafting process has produced text that is internally contradictory.  As an initial matter, in these situations, seemingly “clear” text is often not so clear precisely because the drafters have not been able to systematically use uniform terminology.  But a strict textualist might be more inclined to find clarity where it does not exist by reading provisions in isolation (as I believe they are in Halbig), particularly when other provisions in a sloppily drafted law do not provide sufficient external clarity.  I also don’t buy the efficacy of the deterrence argument.  Imagine that the Democrats in Congress knew that courts would enforce the strict text of a law that didn’t go through conference, even when it would force absurd results, on the night Scott Brown won the special election in Massachusetts.  Do we honestly expect that they would have chosen to not pass any law simply for the bonus of (slightly, if at all) more purposive reading by the courts?

But most fundamentally, these situations of sloppy drafting seem to me to be the ideal place for purposivists to explain the virtue of courts acting as partners in government.  As Justice Breyer has explained, “[a] court that looks to purposes is a court that works as a partner with Congress.  It is a court that helps make the Constitution work better in practice.  And it is a court that achieves results that the general public should find easier to accept — even if the court’s conclusions are, as is inevitable, sometimes wrong” (p. 102).  The courts reviewing the tax-credits cases would be wise to heed this advice.

4 thoughts on “Halbig and the ACA’s Peculiar Legislative History

  1. The “such Exchange” argument is being asked to bear a very heavy weight here. Plainly the Exchange is not in fact being established by the State, since it is that failure which gives the Feds the authority to establish it. As a matter of fact, it is being established by the Feds, not the State. We are asked to assume that the word “such” does not merely allow the Feds to establish an Exchange of a similar type to that which the State would, if it had been willing, have established; but also that the Fed Exchange is deemed to be the Exchange that the State has deliberately not established. And yet, it cannot be that the Feds are acting as the State’s agent, since that would be back to commandeering the State. So it is a subtle statutory fiction, a deeming provision, elegantly inserted by the word “such.” Well, maybe. But if “such” is to bear this enormous weight, what weight should be given to the words “established by the State” throughout the tax credit provisions ? Apparently, for believers in the “such Exchange” theory, no weight at all. We are asked to believe that a drafter so subtle as to slip in a complex statutory fiction with the single word “such” then wastes tons of ink, spattering pointless words elsewhere in the PPACA. It’s not logical Captain.

    • Thank you for the response. I think you’ve effectively expressed the most popular argument for the challengers — that the words “established by the State” hold no meaning if “such Exchange” allows the federally facilitated exchange to take its place. With that said, I think there are at least two responses:

      First (as you suggest), we could view that phrase (“established by the State under section 1311”) simply as a term of art, whose words can act as a placeholder rather than a phrase to be carefully parsed. Congress does this quite often. For one particularly striking example, a non-felony can count as an “aggravated felony” in immigration law. I do not mean to suggest that section 1321 of the ACA (“such Exchange”) is as clear as the definitional section of the immigration statute; the point is simply that words in statutes are not always what they seem.

      Second, and most fundamentally, I think the question a judge should ask herself in this case is what interpretation of the statute provides the most harmony across all of its provisions. And on that measure, I think that reading “established by the State” as an explicit and exclusive textual confinement would be a mistake, especially when the “such Exchange” language provides a permissible reading that avoids it. As I mentioned in the original post, the “qualified individuals” provision is only one of many striking examples where this reading would not be sensible. The provision in the reconciliation bill requiring the reporting of tax credits by federally facilitated exchanges is another. Is it more plausible to believe that “such Exchange” allows the federally facilitated exchange to act in the place of the Exchange “established by the State,” or that the reporting provision was written with the intention that the federally facilitated exchanges would report $0 in tax credits. I would take the former, but certainly the challengers disagree. (For more on the reporting provision, click on the post linked above from Professor Gluck, who makes a compelling case that the reporting provision should end this debate based on her extensive research on the way Congress writes laws.)

      For more on arguments of this variety, I highly recommend Judge Friedman’s carefully reasoned decision, which you can read here: http://www.scribd.com/doc/199925805/Judge-Friedman-Halbig-v-Sebelius-Opinion

  2. “Peculiar?” Try “corrupt” or “unethical” or “deceptive” or all of the above.

  3. How could we interpret what purpose congress had in passing this particular legislation when they did not know what it contained due to rushed passage? As one legislator famously said ‘We have to pass the bill to find out what is in it’. That makes the assumption that rather than pass a specific bill and all its particulars they were voting for any such bill and would refine the content later. Therefore congresses intent in passing this bill seems to have been to pass any old bill that was sort of like an ACA. The fact there was poorly constructed verbage should cause the courts to return the bill to Congress to fix it so their intent is made clear. I liked what the Supreme Court said when they asked if they were expected to clean up badly drafted legislation.

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