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Justice Anthony Kennedy Might Use a Conservative Principle to Save Obamacare

Here are the three most likely outcomes in the Supreme Court case


Supreme Court oral arguments, especially in big cases in which the justices’ leanings are well-established, rarely surface surprising new issues or unanticipated changes of direction. But the March 4 argument in King v. Burwell, the blockbuster Obamacare challenge, was the rare exception. Minutes into the argument, Justice Anthony Kennedy startled court-watchers when he bluntly said the challengers’ interpretation—that the Affordable Care Act does not provide health-insurance subsidies in the 34 states with federally facilitated exchanges—creates “a serious constitutional problem.” 

Kennedy elaborated, “[I]f your argument is accepted, the States are being told either create your own Exchange, or we'll send your insurance market into a death spiral.” Such a threat, he observed, could amount to unconstitutional “coercion” to pressure states to set up exchanges. If this is Justice Kennedy’s take, his most likely outcome would be to adopt an alternative interpretation that avoids having to face the constitutional issue. The Obama administration’s interpretation—that the ACA prescribes credits for customers on all exchanges, whether state-run or federally facilitated—fits that bill.

Three years earlier, in National Federation of Independent Business v. Sebelius, Kennedy had joined three other conservative justices (Antonin Scalia, Clarence Thomas, and Samuel Alito) in fierce dissent from a decision that left intact the bulk of the ACA, against states'-rights-based constitutional challenges to its individual mandate and Medicaid expansion provisions. After Kennedy did so, many predicted he would again vote to hobble the ACA in King. Few suspected that he might be consistent in another direction—solicitude for what he termed “the dynamics of federalism”—much less embrace a states'-rights-based constitutional theory never addressed by either party, that could save the law from the existential threat posed by this new lawsuit.

Kennedy’s tack abruptly reset the terms in which the King case had theretofore been framed, as a straightforward debate about statutory interpretation: Should one ACA provision, referencing exchanges “established by the state,” trump other provisions that indicate that federally facilitated exchanges are the functional equivalent of state-established exchanges and credits should be equally available on both? In the intervening three months, nothing has happened to change Kennedy’s reset. If anything, its salience has been reinforced, as the media, Congress, and states have vented mounting anxiety about the disastrous “death spiral” consequences he spotlighted. 

Previously, only one case had invalidated a law under a coercion theory like the one Kennedy advanced—NFIB v. Sebelius itself. Then, the Court held unconstitutional the ACA's method to incentivize states to expand Medicaid coverage to all adults up to 138 percent of the Federal poverty level. If they declined, states risked losing federal financial support for their pre-existing Medicaid programs, on average over 10 percent of state budgets. That, seven justices agreed in two separate opinions, was a bridge too far. Chief Justice Roberts, joined by progressive Justices Breyer and Kagan, ruled that this “financial inducement” amounted in effect to “a gun to the head . . . so coercive as to pass the point at which pressure turns into compulsion.”

Why were both sides caught off-guard by Kennedy’s attraction to extending the NFIB coercion holding to King, but this time for the benefit of the ACA? The reason, I suggest, is a deep bipartisan cynicism about the Court’s “federalism” jurisprudence. Contemporary “federalism” doctrines have widely been considered, especially but not exclusively on the left, as mere cover for politically driven decisions, designed to cripple federal laws that regulate business or protect individual and minority rights. The notion that “federalism” could be brandished by a conservative justice, to defend a law abhorred by conservatives, was on few radar screens.

What that cynicism seems to have missed is that, as an ideological matter, Justice Kennedy takes very seriously what he repeatedly lauds as the "federal balance." In particular he takes himself seriously as a savant on the subject. His preoccupation with coercive effects of conditional federal spending laws draws inspiration from a vein of scholarship little noted outside wonky conservative legal circles. In the words of University of Texas professor Lynn Baker, “[T]he greatest threat to state autonomy is, and has long been, Congress’ spending power.” Baker and kindred thinkers target strings attached to federal grant programs, as addictive gimmicks that seduce state governments to achieve federal policy goals beyond those specifically “enumerated” in the Constitution. Their writings have left discernible imprints in opinions by Justice Kennedy and others in the Court’s conservative bloc, notably, in the NFIB v. Sebelius dissent.

In sum, Justice Kennedy might well see King v. Burwell more as an opportunity to advance his federalism ideology, than as a second shot at vindicating the Republican political priority of crippling Obamacare, for which he showed evident sympathy three years ago.

If in fact that ideological priority drives Kennedy’s vote and the reasoning of any opinion he writes or joins, what are the possible outcomes for the case? Realistically, there are three.

First, there is the doomsday scenario, suggested after the oral argument by some anti-ACA spinmeisters . In this view, Kennedy was angling to embrace the challengers’ narrow interpretation of the law, thence to create a majority of five to eliminate tax credits in federal exchange states. Since Kennedy believes that, so understood, the exchange provisions would raise a serious constitutional question, that would mean either that he would simultaneously, in King itself, hold those provisions unconstitutional, or would in effect be aiming to provoke a new round of lawsuits that would directly pose that question. In either event, were five justices to rule the exchange provisions a “gun to the head” threat, that could, given the centrality of tax credits to the overall scheme of the ACA, put much of the rest of the law in legal as well as practical jeopardy. 

There is little basis for taking this doomsday scenario seriously. For starters, in the oral argument, Kennedy brushed it aside. “I think,” he said, “the Court and the counsel for both sides should confront the proposition that your argument raises a serious constitutional question. . . . it is in the background of how we interpret this statute.” (Italics added.)That seems a pretty clear indication that Kennedy is looking to interpret the statute to avoid the coercion question, not to finding an excuse to declare it unconstitutional. Further, to make the challengers’ death-spiral interpretation a self-fulfilling prophecy could come across as a transparently political misreading of a law that brims with multiple textual counter-indications, and a judicial mockery of the universal understanding of the Congress that enacted it. Would Kennedy want to taint his coercion theory by going there? And if he did, would Roberts provide a fifth vote to make a majority? After all, in NFIB, Roberts pointedly distanced himself from the four-justice dissent, which not only struck down the ACA’s individual mandate and its Medicaid expansion, but ruled that, without those two provisions, the entire statute had to be overturned. 

A second possible scenario would be the roll-back option: Kennedy would follow his oral argument script, save the ACA by adopting the administration’s interpretation for constitutional avoidance reasons, but elaborate a definition of coercion so extreme or open-ended that it invited legal challenges to other established joint federal-state programs, such as pre-ACA Medicaid, No Child Left Behind, or the Clean Air Act. This prospect worries some progressive observers. However, such an opinion would likely attract no other signatories. The four progressive justices would reach the same result—upholding the administration’s interpretation of the law—either as a simple matter of statutory interpretation, or on a constitutional avoidance rationale with more limited collateral damage implications. Just such a rationale was put before the Court in two friend-of-the-court briefs, to the effect that the challengers’ version of the ACA provided states with no constitutionally required “clear statement” of the disastrous consequences of choosing not to set up exchanges. Further, Roberts could well decline to endorse a definition of coercion that threatened to upend multiple entrenched federal-state programs. He did just that by spurning the dissent in NFIB. 

Finally, there is a third possible outcome, the bipartisan consensus option: Kennedy would write or join a majority opinion including the four progressive justices, and, possibly, Roberts. Such an opinion would set in stone NFIB’s unconstitutional coercion doctrine, and save it from dismissal as a one-off rule applicable only to one extraordinary case. But it would circumscribe the doctrine’s implications enough to gain the progressives’ endorsement. Such an outcome could have significant appeal for Kennedy, and, possibly, for Roberts as well, who might be induced to join because that would empower him, as chief justice, to assign responsibility for writing the opinion. 

In short, while it is possible that King v. Burwell will realize its fans’ dream of “driving a stake through the heart of Obamacare,” the better bet is that conservative ideology will trump that political goal, and on terms with which progressives can live.