Obamacare and Administrative Law: Overturning the Chevron Doctrine

In the area of administrative law, few principles are as hallowed as Chevron deference.  Under the doctrine, courts must accept any "reasonable" interpretation by an agency of ambiguous language in a statute.  The doctrine "is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.” FDA v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 159 (2000). 

The idea, however, that Congress intended agencies to interpret ambiguous statutes is a fiction.  The reason for the doctrine is more about policy.  The approach reduces judicial involvement in the interpretation of statutes. Moreover, by deferring to agencies, the courts in effect make the executive branch responsible for the resulting interpretation.  In doing so, an unhappy electorate can ensure some degree of accountability.

Whatever the underlying rationalization, courts are stuck with the obligation to defer to agencies, at least where the reasonable interpretation is articulated in the form of rulemaking.  Where courts do not like an agency's interpretation, they either must find that the statute was not ambiguous or the resulting interpretation was unreasonable.    

In King v. Burwell, the most recent Obamacare decision, the Court (per Chief Justice Roberts) added another avenue for courts wanting to avoid administrative deference.  In that case, the Court had to interpret language in the Affordable Care Act that provided tax credits to persons purchasing insurance through "an Exchange established by the State".  The IRS had promulgated a rule that extended tax credits to those obtaining insurance over either a state or federal exchange.    

To the extent that the applicable language in the statute was ambiguous (something that the Court found), the interpretation adopted by the IRS was, under a traditional Chevron approach, entitled to deference.  The Supreme Court, however, disregarded the traditional presumption.  As the Court noted:

• In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.” Ibid. [FDA v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 159 (2000)] This is one of those cases. The tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people. Whether those credits are available on Federal Exchanges is thus a question of deep “economic and political significance” that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly. It is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort. This is not a case for the IRS. [citations omitted]

In conducting the analysis directly, the Court provided some certainty.  Reasonable interpretations by agencies can be changed and, so long as they remain reasonable and are not arbitrary, will be upheld.  See Perez v. Mortgage Bankers Association.  A future IRS could in theory conclude that only those obtaining insurance over a state established exchange would be entitled to credits.  So long as reasonable (and not arbitrary), a court would be obligated under Chevron to uphold the position.  By deciding to resolve the ambiguities in the statute, the majority in King deprived the IRS of any future discretion to change the interpretation.  

On the other hand, the Court opened the door to future decisions disregarding the Chevron presumption. Since the presumption is already a fiction, it will not be hard for future parties to make a credible case that Congress did not intend to leave the authority to construe ambiguity with the relevant agency.  In those circumstances, an agency's "reasonable" interpretation would no longer be entitled to deference.