The opinion of the 6-person majority in King is long and complex, winding its way through multiple ways of approaching the interpretation of the Affordable Care Act’s tax credits provision.  But there are three key takeaway points.

First, the Court held that those four little words, “established by the State,” are ambiguous—even though they have a seemingly clear natural meaning.  Therefore, the Court said, the words have to be considered in the context of the statute as a whole and what Congress was trying to do in passing it.

Second, the Court placed a great deal of weight on a single word in another part of the statute: “such.”  The statute says that if a state elects not to set up its own Exchange, the HHS Secretary will establish “such Exchange.” To the Court, that word “such” means the state and federal Exchanges were intended to be the same, at least in the context of that part of the Affordable Care Act.

Third, the Court was profoundly influenced by its desire to avoid an interpretation of the law that would defeat Congress’s purpose in passing it.  That purpose was to create a functional market through which individuals could buy insurance.  Congress passed three insurance market reforms – the individual mandate, the guaranteed issue and community rating requirements, and the tax credits – that are closely intertwined, mutually reinforcing, and mutually necessary facilitators. The Court found it “implausible” that Congress intended for States that opted not to set up their own Exchanges to suffer the foreseeable, well-understood consequence of a “death spiral”.  (The spiral occurs because without the tax credits, a very large proportion of the people who would otherwise be required to buy insurance get exempted from the individual mandate because the insurance cost exceeds a set amount of their income. That means too few people—and in particular, too few healthy people—buying insurance now. Because of guaranteed issue and community rating, people know they can buy insurance later when they get sick. Their decisions to do so push premiums up for everyone, and the adverse selection makes the market unsustainable.)

Two turns in the majority opinion were surprising.  It was interesting that the majority didn’t appear to be moved by an argument in which Justices Kennedy and Sotomayor expressed considerable interest during oral argument: that the challengers’ reading of the statute had Congress creating a penalty for states deciding not to set up their own Exchanges that was so economically devastating it looked a lot like the “gun to the head” that drove the Court to strike down aspects of the Medicaid expansion as too coercive in the NFIB case.  Although the King opinion was strongly driven by the justices’ recognition of the “death spiral” problem, the majority only linked that problem to arguments about what Congress intended when it wrote the statute – not implications of the challengers’ reading of the statute for federalism and state sovereignty.

It’s also noteworthy that the Court declined to apply Chevron deference in this case. Usually, when the words of a statute are ambiguous, courts defer to a reasonable construction of the words adopted by the agency to which Congress delegated authority to implement the law. Not so here, because the Court said the issue was too economically and politically important.  If Congress had wanted the IRS to decide which types of exchanges were eligible for tax credits, the Court said, it would’ve said so clearly. It’s particularly unlikely that Congress would’ve delegated that authority to the IRS, the majority wrote, because the IRS has no expertise in crafting health insurance policy. The Court’s position on the need to apply Chevron deference here isn’t unprecedented, but it’s unusual.

The trio writing in dissent could hardly have shown greater disgust with the majority’s approach. They disputed the majority’s threshold claim that the four little words were ambiguous—and everything that followed from it. The length and complexity of the majority’s justification for its holding, they claimed, is just proof that (once again) the justices are contorting the law in order to achieve a political objective—upholding the Affordable Care Act.

My own view is it’s hard to deny each side made persuasive arguments.  They could do so because the rules that govern how courts should interpret statutes direct courts to look at several different things, and in this case, those things didn’t all point in the same direction. But on balance, I think the majority got it right in pointing to the well-understood consequences of withholding tax credits as evidence that Congress didn’t intend the reading the challengers urged.  The decision is on firm legal ground, and to public health advocates, is an enormous relief.