EEK: Have states missed the boat for "establishing" an exchange?

This is really the most appropriate response to today's jaw-dropping speculation from UM law professor Nicholas Bagley (who supports the ACA, I should note):


— Alex Wayne (@aawayne) April 13, 2015

So what's all the hubbub about?

Well, this morning Bagley penned this little ditty over at the Incidental Economist:

If the Supreme Court rules for the plaintiffs in King v. Burwell, the thirty-four states without their own exchanges will come under immense pressure to create them. But there’s a catch, one that so far has gone unmentioned in the debate over King. Could residents of the states with new state-based exchanges even qualify for subsidies?

The question may seem surprising. The governing assumption has been that, after the Supreme Court decides King, the states could restore subsidies to their residents by setting up their own exchanges. As Justice Alito said at oral argument, “it’s not too late for a state to establish an exchange if we were to adopt [plaintiffs’] interpretation of the statute. So going forward, there would be no harm.”

But look closely at the statute. The fight in King is about the meaning of a provision of the Internal Revenue Code linking the subsidies to the cost of a plan purchased on “an Exchange established by the State under 1311.” Section 1311, in turn, says that “[e]ach State shall, not later than January 1, 2014, establish an American Health Benefit Exchange.”

He goes on to walk back this premise, noting that "basic rules of statutory construction suggest that the statute can’t be read to support that conclusion." He notes however, that just because it wouldn't make a lick of sense for the SCOTUS to interpret it this way doesn't mean that they won't do so anyway (after all, the entire case itself is laughable...and yet here we are).

The most interesting part to me (aside from the heart attack-inducing lede) is this note at the end:

So far, King’s proponents haven’t made this argument. But they haven’t disavowed it, either. Their conspicuous silence makes me fear that they hope to press the argument once the dust settles on King. If so, I could well imagine another ugly round in the endless litigation over the ACA.

I confirmed, during a Twitter back-and-forth with Bagley and several others, that he didn't "spill the beans" on this argument; the plaintiffs (Cannon/Adler) were already well aware of it but chose not to use it in their case.

Why? Well, as both Bagley and r subramanian put it:

@charles_gaba @nicholas_bagley @sangerkatz @afrakt because Alito may not know and SCOTUS follows his "solution." Then Cannon/Adler sue again

That's pure evil, right there. If Cannon/Adler had played the "1/1/14 deadline" card during oral arguments, then the SCOTUS justices would likely conclude that a "stay" of 6 month or even 1 year or whatever wouldn't resolve the issue, making it all the more likely that they'd rule against the plaintiffs entirely instead of trying to "thread the needle".

By not bringing it up, it's more likely that Roberts & Kennedy will go the "King wins with a 6-month stay" route that Alito which point Cannon/Adler could file a second suit based purely on the 1/1/14 deadline.

If that case also went in their favor, since the question of being able to dole out tax credits would have already been resolved (against the government), that would leave 34 (or 37?) states high and dry.

Hopefully this will all turn out to be just a thinking exercise for Constitutional lawyers, but at this point anything is possible.