King v. Burwell and the Four Words the Supreme Court Chose to Rewrite

Four words decided King v. Burwell: "established by the State." They are not obscure. They are not technical. A fourth grader can tell you what they mean, and in 2015 six Justices of the Supreme Court held that they meant something else.

I want to take that decision seriously, as law and not as a partisan grievance. A good argument about a bad opinion starts by granting what is strong in it. So this post sets out the statute, the question, the holding, the dissent and the government's best case, and then says what the case teaches about the three institutions that should have prevented the problem: Congress, the agencies and the courts.

The terms

A few definitions, so the dispute is clear.

An exchange is the online marketplace the Affordable Care Act created, where people shop for private insurance plans. A premium tax credit is the federal subsidy that lowers a buyer's monthly premium. A federal exchange is one run by the federal government on behalf of a state that declined to build its own.

The question in the case was whether people who bought insurance on a federal exchange could receive the tax credit. A great deal rode on the answer. When the case reached the Court, the federal government was running the exchange in 34 of the states. Millions of people received subsidies through it. If those subsidies were unlawful, the structure of the law was in danger.

The text

The relevant provision is Section 36B of the Internal Revenue Code. It sets the amount of the credit, and it does so by reference to the premiums for plans that were "enrolled in through an Exchange established by the State under section 1311" of the Affordable Care Act.

Section 1311 is the provision that tells each state to establish an exchange. It is the section about state-run exchanges. A different section, 1321, says that if a state does not establish its exchange, the Secretary of Health and Human Services shall "establish and operate such Exchange within the State." The government's argument, which we will come to, rests on the word "such."

The petitioners were a group of Virginia residents, led by David King, who did not want to buy insurance and argued that without the credit they would be exempt from the mandate, because the cost of coverage would exceed the statutory threshold. Virginia used the federal exchange. Their claim was that the statute, as written, gave credits only to people who bought on a state exchange, and that the Internal Revenue Service had no power to extend them further.

The IRS rule

Treasury and the IRS had written a regulation, finalized in 2012, that defined an exchange for credit purposes to include the federal exchanges. The agency's reasoning was that the credit should be available in every state. The rule was an agency decision to make the credit available where the statute's literal text had, on the petitioners' reading, withheld it.

The lower courts split in July 2014, on the same day. The D.C. Circuit, in Halbig v. Burwell, ruled 2 to 1 that the text meant what it said and the IRS rule was invalid. That ruling was later vacated when the full court agreed to rehear the case. The Fourth Circuit, in King itself, ruled the other way and upheld the IRS rule. The Supreme Court took the Fourth Circuit's case, heard argument on March 4, 2015, and decided it on June 25, 2015.

The holding

The Court ruled 6 to 3 in favor of the government. Chief Justice Roberts wrote the opinion, joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan. Justice Scalia dissented, joined by Justices Thomas and Alito.

The majority's reasoning had three parts.

First, it declined to defer to the IRS. Under the Chevron doctrine, then in force, a court would ordinarily accept an agency's reasonable reading of an ambiguous statute. The Court said this case was different. The availability of billions of dollars of subsidies, the Court said, was a question of deep economic and political significance that was central to the statute, and if Congress had meant to leave that question to the IRS, it would have said so expressly. It was a judge's job to decide. This is the idea later called the major questions doctrine, discussed in The Major Questions Doctrine Explained, From Tobacco to the Power Plants.

Second, the Court found the phrase ambiguous when read in the context of the whole law. It said the words, taken alone, might seem to favor the petitioners, but that other provisions of the act, which required credits to be calculated and reported in ways that assumed they were available on every exchange, did not fit that reading. The Court concluded that the credits are available on the exchange in every state, whether the State built it or the federal government did.

Third, the Court looked to the purpose of the law. The Chief Justice wrote that Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. Without the credits, the Court reasoned, the market in the affected states would suffer a "death spiral": healthy people would leave, premiums would rise, more people would leave, and the markets would collapse. Congress could not have meant that.

The dissent, read closely

Justice Scalia's dissent is short on rhetoric and long on text, and it repays a slow reading.

His central point was that the phrase has a plain meaning, and that the majority had to go out of its way to avoid it. He wrote: "Words no longer have meaning if an Exchange that is not established by a State is 'established by the State.'" That is the heart of it. A federal exchange is not a state exchange, and the statute drew a line between the two, because it used the word "State" in a defined sense, and the act's own definition of "State" meant the fifty states and the District of Columbia, not the federal government.

He then went through the other places where the act used the phrase "established by the State" or its relatives, and argued that each of them made sense under the plain reading. The majority's reading, he said, required treating the phrase as meaningless in one place and meaningful in others. He also answered the "such Exchange" argument: the word "such" in Section 1321 says the federal exchange stands in the place of the state exchange for purposes of operating it, which does not make it an exchange "established by the State" under Section 1311.

Finally, he rejected the idea that a court may rescue a statute from its consequences by rewriting it. If the law's drafters had made a mistake, he said, it was for Congress to fix. The famous line, written with the sharpness of a man who knew he was on the losing side, was: "We should start calling this law SCOTUScare." It was a joke with a point. The Court had now twice, in 2012 and in 2015, taken the statute's words and reworked them to keep the scheme running.

The government's best argument

A fair post has to give the other side its best case. The government's strongest argument was the design of the statute.

The Affordable Care Act rested on three connected requirements. Insurers had to accept everyone, regardless of health. They could not charge sick people more. And everyone had to buy coverage, so that healthy people would pay into the pool. The tax credits were the part of the structure that made the third requirement affordable. If the credits vanished in a state, the mandate would not apply to people who could not afford coverage, the pool would be drained of healthy people, and the guaranteed-issue and community-rating rules would drive premiums up. A statute that so plainly needed the credits everywhere could not sensibly be read to withhold them in most of the states.

Put differently: the law was a machine with interlocking parts, and a reading that removes one part breaks the machine. That is a serious argument, and it is the argument the Chief Justice accepted.

The answer to the government

The answer has four points.

1. Design is evidence of purpose, and purpose is not text. The Constitution gives Congress the power to legislate, and it does so through the words Congress passes, in the manner the Constitution prescribes. A judge's feeling that the law ought to have been drafted differently is not a source of law.
2. The plain reading was not absurd. The petitioners' reading produced a harsh result, but it did not produce nonsense. The statute could be understood as a bargain: states that built exchanges would get credits for their residents, an inducement to build one. Congress uses such inducements all the time, as in conditional grants to states. Whether the policy was wise is a question for Congress.
3. The "death spiral" is a consequence, not a meaning. A court that reads a statute to avoid a bad result has turned the process upside down. The job is to find out what the words mean and apply them, and if the result is bad, to let Congress repair it. Congress was fully capable of repairing it in 2015, and the political cost of leaving millions without subsidies would have made the repair swift.
4. Rewriting has a cost. When courts fix a statute's mistakes, legislators learn that sloppy drafting carries no penalty. The next law will be sloppier. The incentive to get the words right depends on judges holding Congress to them.

This last point is the one I would underline. Textualism is not a cold preference for dictionaries. It is a rule about who governs. The words of a statute are what a majority of two chambers and a President agreed to. Anything else is the opinion of an individual, however learned.

The wrinkle on deference

Here is an irony. The Court refused to defer to the IRS, which is a point conservatives usually applaud, and then used its own judgment to reach the result the IRS wanted. The refusal to defer was a victory for the idea that courts, not agencies, say what the law is. In Loper Bright Enterprises v. Raimondo in 2024, the Court overruled Chevron and made that the general rule, as Chevron Began as a Win for Reagan's EPA, Which Makes Its Fall So Ironic describes. Yet the court that insisted on the judge's role used that role to set aside the plain meaning of the words. A court that takes the pen away from the agency should be careful before it uses the pen itself.

What the case teaches

Three institutions failed to do their jobs, in sequence, and each lesson belongs to a different one.

Congress. A statute of this size, passed in a hurry and amended through a reconciliation bill, left an ambiguity at the center of its subsidy scheme. The legislature has the power to write words that are clear, and it did not. The lesson is that speed and secrecy in lawmaking produce mistakes that other branches then pay for. Article I, Section 1 vests "all legislative Powers herein granted" in Congress. The power to legislate carries the duty to legislate clearly.

The agencies. The IRS took a provision that said one thing and issued a regulation that said another, and it did so without a clear statement from Congress that it could. The lesson is in The Nondelegation Doctrine Says Congress Cannot Hand Its Job to Someone Else: when an agency fills gaps with policy, it exercises power that the Constitution places elsewhere.

The courts. The Court's job in a statutory case is to read the words. When it reads them to say what they plainly do not, it joins the other two branches in blurring the lines. Conservatives should be consistent on this. If we object when a court rewrites a statute to expand the government, we cannot cheer when a court rewrites a statute to restrain it. The principle is the text.

The Founding connection

Alexander Hamilton wrote in Federalist No. 78 that the judiciary has "neither force nor will, but merely judgment." Hamilton meant that courts should not make policy. They exercise judgment about what the law is, and they leave the force to the executive and the will to the legislature. A court that says the words of a statute must give way to the structure of the program has substituted its will for the legislature's. It did so for a reason many people found sympathetic, and that is exactly when the principle is tested. The principle is only worth anything if it holds when the outcome is one the Court likes.

The case in brief

1. Section 36B of the Internal Revenue Code tied the premium tax credit to plans "enrolled in through an Exchange established by the State under section 1311," and a majority of states used the federal exchange.
2. In King v. Burwell (2015), a 6 to 3 Court led by Chief Justice Roberts held that the phrase included federal exchanges, reasoning from the statute's overall design and the risk of a market collapse.
3. Justice Scalia, joined by Justices Thomas and Alito, argued that the words had a plain meaning, and that a court may not rewrite a statute to rescue it from the consequences of its own text.
4. The government's best argument, that the law's three-part structure needed the credits everywhere, is serious, but it describes what the law's authors may have wanted, not what Congress enacted.
5. The case teaches that Congress must write clearly, agencies must not fill gaps with policy, and courts must hold to the text even when the result is hard.

What you can do: read Section 36B on Congress.gov or the Cornell Legal Information Institute, find the phrase for yourself, and then write to your representative asking that major statutes be drafted so that their key words can be understood without a Supreme Court case.