Halbig and the “Whole-Text Canon”: Cato Reflections Part III

On October 30, I was invited to participate in a Cato Institute panel discussion on Halbig, King, and related challenges to the Affordable Care Act. In the wake of the conference, I’ll be writing a few posts based on the panel discussion. If you’d like to watch the entire law-focused panel, I’ve created a C-SPAN clip here. Other reflections at Part I (Isolationism), Part II (Textualism), Part III (The Whole-Text Canon), Part IV (Halbig’s “Two Exchanges” Problem), and Part V (Creeping Constitutionalism).

Previously, I set out a brief textualist interpretation of the ACA provisions directly applicable to the question of whether subsidies are available on federal exchanges. Though only a few ACA provisions are directly applicable to the question, one must consider the entire statute to determine the best interpretation of those provisions.

Perhaps no interpretive fault is more common than the failure to follow the whole-text canon, which calls on the judicial interpreter to consider the entire text, in view of its structure and of the physical and logical relation of its many parts. Sir Edward Coke explained the canon in 1628: “[I]t is the most natural and genuine exposition of a statute to construe one part of the statute by another part of the same statute, for the best expresseth the meaning of the makers.” Coke added: “If any section [of a law] be intricate, obscure, or doubtful, the proper mode of discovering its true meaning is by comparing it with the other sections, and finding out the sense of one clause by the words or obvious intent of the other.”

Scalia & Garner, Reading Law at 167 (discussing the whole-text canon).

This is Air Bud. Trust me, he's relevant to statutory interpretation. We'll get to him later.

This is Air Bud. Trust me, he’s relevant to statutory interpretation. We’ll get to him later.

The Continued Contextual Inquiry

Though Part II’s narrowly focused textual interpretation is certainly (on its own!) a possible reading of the statute, my goal here is not to present an isolationist interpretation of the applicable provisions. This post therefore continues with an analysis of how the applicable provisions fit within the ACA as a whole.

Yes, one could read section 1321 exchanges as functionally equivalent to section 1311 exchanges. But one could also read “established by the State” to exclude section 1321 exchanges. Indeed, if you’re looking only at section 1401 that might be the more convincing reading (not that you’d want to do that). We need not make a decision between those two interpretations at this point because a textualist interpretation must look to the text of the entire statute to determine a provision’s plain meaning. The relevant question is not whether the rest of the statute can be twisted in a manner that permits our initial reading to survive. Rather, the question is which of the two competing interpretations is most consistent with the statute’s overall usage, design, structure, and context.

Interpretation Based on Statutory Design?

In deciding whether the phrase “established by the State under section 1311” is meant to exclude section 1321 exchanges, one should look at how exchanges are referenced throughout the ACA. Are section 1321 exchanges specifically referenced as federally established 1321 exchanges elsewhere in the statute? Does the ACA’s statutory language carefully distinguish between section 1311 exchanges and section 1321 exchanges? Does the statute use specific phrasing when it intends to exclude federally established exchanges?

Short answer: No. Outside of section 1321 federal exchanges are hardly mentioned in the statute. In fact, exchanges are generally inconsistently referenced in all of the following ways:

  • “Exchange established pursuant to this title” in section 1303(a)(1)(D);
  • “Exchange established under this Act” in section 1312(d)(3)(D)(i);
  • “Exchange established under section 1311,” in, for example, section 1331(e)(2);
  • “Exchange established by the State under 1311,” in section 1401(b)(2)(A);
  • And of course “Exchange” without modification used throughout the statute.

Which of the foregoing phrases includes federally established section 1321 exchanges? Is this cornucopia of phrasing more consistent with a strict interpretation that divides between federal and state exchanges? Or does it indicate a more flexible reading?

Moreover, the statutory text itself renders wholly illusory any distinction between an Exchange, an Exchange established under section 1311, and an Exchange established by the State under section 1311. The definition of “Exchange” includes a reference to section 1311, so all Exchanges are section 1311 exchanges by definition. And since section 1311 only refers to state-established Exchanges, all section 1311 exchanges are necessarily state exchanges or their functional equivalents.

The statute’s seemingly scatter-shot references to various Exchanges calls to mind this passage from Scalia and Garner’s Reading Law:

Sometimes drafters do repeat themselves and do include words that add nothing of substances, either out of a flawed sense of style or to engage in the ill-conceived but lamentably common belt-and-suspenders approach. . . . Before the 2007 revisions, the Federal Rules of Civil Procedure contained varying requirements for causefor good causefor cause shown, and for good cause shown. There was no reason to believe that, after removal of the attendant modifiers, the cause did not have to be good or did not have to be shown.

Id. at 176-77. The usage of various modifiers of “Exchange” throughout the ACA is similarly inconsistent. When the text itself exhibits a lack of terminological precision, such precision should not be imposed by the interpreter.

A Reasonable Reading of the Statute as a Whole

Whenever possible, statutory text should be read in a manner that avoids surplusage and that harmonizes the statute as a whole. When comparing two competing interpretations, therefore, we must examine which interpretation is a better fit with the statute’s other provisions.

There is no “perfect” reading of sections 1311, 1321, 1401, and 1563 that avoids all potential for surplusage. So we’ve just got to figure out which reading works best given potential contextual relationships between various sections. I’ve provided a few examples below:

1. Qualified Individuals 

Section 1312 provides that “qualified individuals” under the ACA are individuals who reside “in the State that established the Exchange.” This is a problem for the challengers. If “the State that established the Exchange” is read in the cramped isolationist manner they elsewhere advocate, then perhaps no individual in a state with a federally operated exchange would be a “qualified individual” able to enroll in an Exchange.

This problem disappears under the Government’s view of the text. Under section 1321, the federal government has established “such Exchange” and so it stands in the shoes of the State in section 1312. The individuals in the State can still get coverage on an Exchange.

The challengers respond as follows: “[T]his provision establishes a floor specifying who must be included, not a ceiling specifying who must be excluded.” Halbig Appellant Br. at 39 (en banc). In other words, the ACA says that qualified individuals can enroll in a health plan, but it doesn’t say that non-qualified individuals can’t enroll in a health plan. I like to call this the “Air Bud” method of statutory interpretation: There’s nothing in the rule book that says a dog can’t play basketball!

Then challengers spin themselves dizzy: They contend that if the language is interpreted as a limitation, then the limitation only applies to states with state-established exchanges. Why? Because:

The definition of “qualified individual” is “with respect to an Exchange.” Since “Exchange is defined as an “Exchange established under section 1311,” the definition of “qualified individual” only applies to those § 1311 state-run Exchanges.

Halbig Appellant Br. at 40 (en banc) (emphasis added). In other words, now that the shoe is on the other foot, section 1311 exchanges are necessarily state exchanges. Where was that textual interpretation when the challengers were looking at the availability of tax credits in section 1401?

This is a perfect example of the isolationism I discussed here. When interpreting section 1401, the challengers insist on a strict literal interpretation. But to make that interpretation fit within the broader statutory framework, the challengers are willing to be much more flexible with, shall we say, “problematic” provisions.

2. CHIP-eligible children and Exchanges 

The ACA provides that in certain situations, a state must make specific efforts to provide health coverage to certain low-income children. Specifically, the ACA states:

the State shall establish procedures to ensure that the children are enrolled in a qualified health plan that has been certified by the Secretary under subparagraph (C) and is offered through an Exchange established by the State under section 1311.

ACA § 2101(b) (emphasis added). In other words, if certain conditions are met, the State is directed to enroll children in an plan through an Exchange—but not just any Exchange, an Exchange established by the State under section 1311. That phrase should sound familiar, since it’s the same phrase used in section 1401.

If, however, that phrase does not include section 1321 exchanges, then the statute’s directive in section 2101 is impossible to follow in a state that has a federal exchange. The government’s interpretation of section 1321 and section 1563 removes this problem by permitting section 1321 exchanges to function as section 1311 state exchanges.

The challengers respond that there’s no problem here: Section 2101’s instruction to the states only applies to states with state-established exchanges. It makes no sense (they claim) to require that states enact procedures to ensure enrollment in a federal exchange. See Halbig Appellant Br. at 41 n.3 (en banc).

Maybe, maybe not. But even the Halbig majority called the challengers’ interpretation an “oddity,” though one which failed to meet “the high threshold of absurdity.” Halbig Panel Op. at 29-30 n.10.

There’s no slam dunk here, but ultimately I think the government’s interpretation works better. If Congress intended this directive to apply only in states with state-established exchanges, the text of the provision is quite murky on that point. And even if that were the intent, then the phrase “established by the State” would be redundant since the only exchange in states with state-established exchanges would be (wait for it…) an exchange established by the state.

3. Reporting of tax subsidy information 

This is a tricky one. Section 36B(f)(3) sets out certain reporting requirements for each “Exchange” or an entity carrying out the “responsibilities of an Exchange under section 1311(f)(3) or 1321(c).” On the one hand, this is a point in favor of the challengers. Here, Congress included a specific reference to federal exchanges under section 1321, despite not doing so in section 1401’s tax-subsidy provisions.

But the challengers’ position proves too much. Even they concede that federal exchanges are “Exchanges” under the ACA. In fact, the foundation of the challengers’ position is that when the ACA wants to include both state and federal exchanges, it uses the purportedly neutral “Exchange” without modification. But that’s precisely what section 36B(f)(3) does. The challengers cannot possibly contend that the reference to section 1321 is necessary because the preceding reference to an “Exchange” does not include federal exchanges.

Moreover, the reporting requirements themselves strongly imply that tax subsidies are available on federal Exchanges. Of the six categories of information the Exchanges (federal and state) must report, half of them relate to tax subsidies. The provision reflects the statute’s design that the subsidies would be available on federal exchanges.

*   *   *   *

The ACA contains additional potentially illuminating provisions, but the above represent a good sampling. In each case, the statute favors a reading of section 1321 that permits federal exchanges to stand in the shoes of state exchanges.

Yes, reading “an Exchange established by the State under section 1311” to include federal exchanges results in some surplusage: the phrase essentially means the same as “an Exchange” or “an Exchange established under section 1311.”

But that observation is not the end of the matter. Any reading of the ACA results in some surplusage. There are three sections 1563 for goodness’ sake. The phrase “an Exchange established under section 1311” is used elsewhere in the statute, and that phrase necessarily includes surplusage because all Exchanges are section 1311 exchanges by definition.

Returning to Justice Scalia:

[L]ike all other canons, [the surplusage canon] must be applied with judgment and discretion, and with careful regard to context. It cannot always be dispositive because (as with most canons) the underlying proposition is not invariably true. Sometimes drafters do repeat themselves and do include words that add nothing of substance.

Sclalia & Garner, Reading Law at 174.

Here, judgment and discretion favor the government. Consider the arguments the challengers raise to render the above-discussed provisions workable and non-absurd under their reading:

  • the “Air Bud” canon,
  • interpreting “section 1311” as limited to state-run exchanges in one section but not others,
  • assuming that silence with respect to low-income children implies the federal government must step in, and
  • meaningless reporting requirements for federal exchanges.

In isolation, none of those interpretive moves is objectionable. But in total, when compared to the simple common-sense notion that section 1321 provides for federal exchanges to functionally step in the shoes of state exchanges, the challengers’ interpretive gymnastics crumble under their collective weight.

And that doesn’t even account for (what I believe to be) the biggest structural/contextual problem for the challengers’ proffered communication, which I’ll address in the next post…


10 thoughts on “Halbig and the “Whole-Text Canon”: Cato Reflections Part III

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