SCOTUS Decision Day Roundup: Supreme Court upholds ACA subsidies and approves disparate impact claims under the Fair Housing Act.

By Daniel A. Horwitz

Today was a major decision day at the Supreme Court of the United States.  Although the Court released only two opinions, both of today’s decisions carry enormous social import in Tennessee and throughout the nation.  Each also represents a major victory for the Obama Administration, which secured wins in support of its health care and housing policies.  The day’s two decisions were as follows:

1.  King v. Burwell (6-3):

In 2010, Congress passed the Patient Protection and Affordable Care Act (“the ACA”), which has since been derided by many as “Obamacare.”  Among other provisions of the law, the ACA sought to make insurance more affordable by giving refundable tax credits to individuals with household incomes that fell between 100 percent and 400 percent of the federal poverty line.

The ACA also required the creation of an “Exchange” in each state, which is essentially a marketplace that allows people to compare and purchase health insurance plans.  The Act afforded each state the option of establishing its own Exchange, but it also provided that the federal government would establish “such Exchange” if a state chose not to establish its own exchange.  At issue in this case, the ACA further provided that tax credits “shall be allowed” to any “applicable taxpayer,” but only if the taxpayer had enrolled in an insurance plan through “an Exchange established by the State[.]”  Thus, the specific question presented in this case was whether tax credits would be available on all exchanges, or whether they would only  apply to exchanges established by states.

Held:  Tax credits are available to individuals in states that have a federal exchange.   According to the Supreme Court:  “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”  Consequently, based on the “fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme,” tax credits are available to individuals who purchase health insurance on either a federally-created or a state-created insurance exchange.

Special commentary and Tennessee connections:  The importance of the Supreme Court’s decision in King v. Burwell cannot be overstated.  In light of the continuing controversy surrounding the Affordable Care Act, this decision carries tremendous social and political significance.  Consequently, in addition to reaffirming the centerpiece of the Obama Administration’s legislative agenda, the fact that the Court returned a 6-3 ruling — and the fact that the majority’s opinion upholding a major component of the Affordable Care Act for a second time was once again authored by U.S. Supreme Court Chief Justice John Roberts (a George W. Bush appointee) — will afford King v. Burwell a storied place in history.

There are also a number of Tennessee connections to King v. Burwell that should be recognized.

First, because Tennessee opted not to establish its own health insurance exchange, approximately 155,000 Tennesseans stood to lose access to health insurance subsidies as a result of this decision.   Based on the today’s ruling, however, those 155,000 Tennesseans will now be able to keep their subsidies.  The effect of this decision is also to spare Tennessee’s health insurance market from what both experts and the Supreme Court itself referred to as a “death spiral.”

Second, two health care law experts who recognized the importance of this issue at its inception (and who also published academic scholarship about it before nearly anyone else in the world) reside here in Tennessee.  Specifically, Amy Sanders – an associate in the healthcare group of Bass Berry and Sims –  correctly argued that the subsidies would be available on federal exchanges all the way back in May 2013, making her case for that position in her Vanderbilt Law Review Note: “A Gap in the Affordable Care Act: Will Tax Credits Be Available for Insurance Purchased Through Federal Exchanges?”  Similarly, Vanderbilt Law Professor James Blumstein was among the earliest to identify the possible contrary position, publicly advancing that argument for the first time several years ago as well.

2.  Texas Dept. of Housing v. Inclusive Communities (5-4):

The federal Fair Housing Act was adopted shortly after the assassination of Dr. Martin Luther King, Jr. in response to persistent racial segregation that had left predominantly black inner cities surrounded by mostly white suburbs.  The purpose of the Fair Housing Act was to address discrimination in housing opportunities on the basis of “race, color, religion, or national origin.”  Under the Fair Housing Act, it is unlawful, among other things, to “refuse to sell or rent . . . or otherwise make unavailable or deny, a dwelling to a person because of race” or another protected class.

Historically, violations of the Fair Housing Act have been demonstrated by showing “disparate impact”:  meaning that “a challenged practice caused or predictably will cause a discriminatory effect.”  For example, if a bank approved 90% of white mortgage applicants but only 7% of black mortgage applicants – even though the applicants were otherwise indistinguishable from one another – the bank could be sued based on disparate impact theory.

The question in this case was whether claims based on disparate impact would continue to be permitted, or if a person would instead have to prove “discriminatory intent.”  Discriminatory intent (which could be proven, for example, by a mortgage lender stating: “I don’t make loans to black families”) is obviously much more difficult to prove, as it is extremely uncommon for people to announce publicly that they intend to discriminate.

Held:  The Fair Housing Act allows causes of action based on disparate impact.  However, mere statistical disparity is not enough; instead a plaintiff must also be able to “point to a defendant’s policy or policies causing that disparity.”

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