Three years ago, Justice Anthony Kennedy voted to declare the Affordable Care Act unconstitutional. So it should come as no great surprise that he expressed constitutional concerns in today's ACA case, King v. Burwell.
His concerns tended to be the major focus of today's Court coverage—as so often tends to be the case, given Justice Kennedy's common role as the "swing justice," the decisive fifth vote. In this morning's case, his concerns focused primarily on federalism—on the impact that the ACA's health exchange provisions, and the administration's implementation of those provisions, could have on state insurance markets.
Under the ACA, the administration is authorized to subsidize health insurance purchased through an "Exchange established by the State." The question before the Court, then, is whether that provision allows subsidies (and the attached penalties, such as the employer mandate and, for many people, the individual mandate) only in states that established their own exchanges. Or, as the administration contends, whether those subsidies and penalties also apply to states where the exchange was established by the Department of Health and Human Services because the state elected not to.
As the transcript shows, Justice Kennedy focused primarily on federalism—namely, the negative impact that states without state exchanges may feel if the administration can't subsidize health insurance in those states. Here is how he first expressed this concern:
Let me say that from the standpoint of the dynamics of Federalism, it does seem to me that there is something very powerful to the point that if 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. We'll have people pay mandated taxes which will not get any credit on -- on the subsidies. The cost of insurance will be skyhigh, but this is not coercion. It seems to me that under your argument, perhaps you will prevail in the plain words of the statute, there's a serious constitutional problem if we adopt your argument.
A moment later, he reiterated the theme:
I fully understand that, but I think the Court and the counsel for both sides should confront the proposition that your argument raises a serious constitutional question. Now, I'm not sure that the government would agree with that, but it -- it is in the background of how we interpret this how we interpret this statute … It may well be that you're correct as to these words, and there's nothing we can do. I understand that.
His reference to "interpretation" points to a longstanding principle of statutory interpretation: If a statute is susceptible to more than one reasonable interpretation, then the Court should adopt the interpretation that avoids constitutional problems.
That is the "canon of constitutional avoidance"—it was the fulcrum of Chief Justice John Roberts's opinion in the last ACA case, NFIB v. Sebelius, when Roberts interpreted the individual mandate to be a constitutional tax rather than an unconstitutional regulation. As Roberts summarized the doctrine, "the rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act."
And in this case, the possible constitutional problem Kennedy has in mind is one of coercion: while the federal government can try to entice states to participate in federal programs, it cannot coerce them to participate. For example, as the Court held in the last Obamacare case, the federal government can offer states more money to expand Medicaid, but they cannot threaten to take away all of a state's Medicaid funds for failing to expand its program.