Might ‘Constitutional Avoidance’ Rescue Obamacare?

The Supreme Court sometimes surprises. In oral arguments Wednesday about the latest conservative attempt to undermine President Obama’s health-reform program, Justice Anthony Kennedy introduced an unexpected potential basis for upholding the Affordable Care Act. Kennedy’s reference to the obscure doctrine of “constitutional avoidance” could change the terms of debate in the most consequential economic case pending before the high court—one that will determine the fate of Obama’s signature legislative accomplishment.

What the heck was Kennedy talking about?

Justice Brandeis and the doctrine of “constitutional avoidance”

In a concurring opinion in Ashwander v. Tennessee Valley Authority(1936), the great Brandeis said the high court should not make constitutional pronouncements “if there is also present some other ground upon which the case may be disposed of.” Not his most elegant prose formulation, perhaps, but an important idea flowing from the concept of judicial self-restraint: Federal judges should decide cases as narrowly as practicable, without flourishes that impinge on the legislative or executive branches.

Justice Kennedy and constitutional avoidance and Obamacare

Three years ago, Kennedy voted to invalidate the Affordable Care Act on constitutional grounds—namely, that in passing the 2010 statute, Congress exceeded its constitutional authority to regulate interstate commerce. So it’s not as if Kennedy is always shy about brandishing constitutional arguments to undo lawmakers’ work. In 2012, he was on the losing side. A 5-4 majority upheld the ACA. Chief Justice John Roberts fashioned a lead opinion finding that the law’s mandate that individuals purchase insurance could be understood as an exercise of congressional taxing power.

Having failed to kill Obamacare by nixing the individual mandate, conservative activists returned this term with a new argument: that the language of the ACA itself seems to distinguish between the 16 states that set up their own insurance marketplaces or exchanges and those that refused to do so, obliging the federal government to do the job for them. The challengers pointed to a provision in the law making tax subsidies available to people who acquire insurance on an exchange “established by the state” and not to some 8 million residents of the other 34 states with federally fashioned exchanges. Denying tax benefits to so many people would cause Obamacare to unravel (that’s the whole idea). Justice Kennedy seemed troubled by this prospect. Limiting the tax benefits to residents of only 16 states, he said, would create a “serious constitutional problem.”

What’s Kennedy’s “constitutional problem”?

He had in mind the doctrine of constitutional avoidance. If the high court interprets the ACA as the challengers urged, Kennedy said, that would mean Congress tried to “coerce” the states into setting up their own insurance exchanges so that their residents would receive the tax benefits. Coercing the states is a constitutional no-no, Kennedy observed. He raised a hypothetical statute that imposed an arbitrarily low speed limit on states unless they built expensive highways. “We wouldn’t allow that,” Kennedy said.

Later, while questioning Solicitor General Donald Verrilli, who defended the ACA, Kennedy said that if the challengers were correct, the states “are being coerced, and you then have to invoke the standard of constitutional avoidance.” Verrilli agreed. “Constitutional avoidance becomes a very powerful reason to read the statute our way,” the solicitor general said.

Wait, did they skip a step?

Yes. Here’s what Kennedy was thinking: The challengers’ interpretation of the ACA (may) coerce the states. That’s unconstitutional. The Internal Revenue Service has provided another interpretation that doesn’t focus narrowly on the four words, “established by the state.” By looking at the overall thrust of the 900-page statute, the IRS concluded that Congress intended to provide tax benefits to all individuals who needed the credits to afford insurance. If the Supreme Court embraced the IRS view—which is what the Obama administration recommends—the danger of unconstitutional coercion disappears, and the justices avoid making a broad constitutional pronouncement.

So are we done? Obamacare survives?

Not so fast. Rumination at oral arguments does not bind the justices. On the other hand, Kennedy didn’t have to air his musings so publicly, and he sure seemed like a lawyer taking a theory out for a test drive. With the four more-liberal justices almost certain to vote to uphold Obamacare, his opinion could be decisive. It’s not for nothing that he’s seen as the “swing justice” on an ideologically divided court. We’ll see how serious he is about constitutional avoidance when the justices issue a ruling, probably in late June.