The justices don't seem to agree.

Photographer: Andrew Harrer

Four Ways Obamacare Can Survive the Supremes

Timothy Jost is a professor at the Washington and Lee University School of Law.
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The chances of Obamacare surviving its latest legal challenge seem much brighter after Wednesday's oral argument at the Supreme Court.

For those who haven't been following the case, at issue is whether the law allows the federal government to subsidize the cost of Obamacare coverage in states that chose not to build their own insurance exchanges -- instead letting the federal government do it for them. The plaintiffs argue that a clause in the law says tax credits apply only to exchanges "established by the state," precluding tax credits on exchanges run by the federal government. The Barack Obama administration says looking at the law as a whole shows that's not the case.

QuickTake Health Insurance Exchanges

The justices' questions offer some support for the law's supporters. At this point the government has four paths to victory; the challengers have only one.

The government's first chance is remote: The court could send the case back to the lower court to investigate whether the plaintiffs have been injured -- what's known as having standing. The reality of their injury has been seriously questioned in the media and the justices also raised questions, but the court seemed eager to move on to the merits.

The government's second defense, and its primary argument, is more promising: If the court considers the entire text of the statute and not just a single phrase, it's clear that Congress intended federally facilitated exchanges to effectively become the exchange in states that chose not to operate one themselves.

There are more than 50 provisions of the law that don't work if federal exchanges can't grant premium tax credits. Today’s argument mentioned only a few, but made clear that the statute as a whole authorizes federal exchanges to grant tax credits.   

Today showed the government's third route to victory could be even more persuasive to the court: Interpreting the ACA to force a state to operate its own exchange -- under a threat of forfeiting tax credits for its citizens and risking the destruction of individual insurance markets -- raises serious questions of unconstitutional coercion. The fact that the supposed threat was buried deep in the statute, leaving states unaware of it, makes this issue even more serious. 

Justice Anthony Kennedy, a likely swing vote, raised this issue repeatedly. Under what's called the doctrine of constitutional avoidance, the court should interpret the statute to avoid this constitutional problem and uphold the tax credits.

A fourth argument didn't get much attention, but it's another way for the government to win. If a statute is ambiguous, a court must defer to an administrative agency charged with interpreting that statute. If nothing else can be concluded from this morning’s argument, it is that Obamacare doesn't unambiguously preclude the way the Internal Revenue Service interpreted the law.

By contrast, the plaintiffs have only one path to victory. The court must conclude, as Justices Antonin Scalia and Samuel Alito apparently would, that the sections of the law that the plaintiffs rely on -- those limiting tax credits to “exchanges established by the state” -- can't be rationally interpreted in any way that permits federal exchanges to grant tax credits. And if that's a problem, well, Congress can fix it.  (To which Solicitor General Donald Verrilli Jr. asked, “This Congress?”) 

Chief Justice John Roberts, the swing vote the last time Obamacare came before the court, didn't give much indication during the argument which way he'll vote. But if either he or Kennedy side with the court's four liberal justices, who clearly see the case as bogus, the ACA will have survived yet another near-death experience. After this morning, that seems like the most likely outcome.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Timothy Jost at JostT@wlu.edu

To contact the editor on this story:
Christopher Flavelle at cflavelle@bloomberg.net