“There’s no question that Justice Kennedy regards federalism as a central value in the Constitution,” Michael C. Dorf, a law professor at Cornell University and former clerk for the justice, told TPM in an email. “Accordingly, he typically votes to sustain challenges to very expansive views of federal power.”
Specifically, the law’s defenders say it would violate states’ rights for Obamacare to deny subsidies for residents of some three-dozen states without a clear warning. Nowhere in the law were states told that eligibility for premium tax credits would hinge on them setting up state-run exchanges, as opposed to letting the federal government handle it.
The states’ rights argument — unusual in this instance because it is typically used against the federal government, not in defense of it — was made in a brief filed by 23 attorneys general in states ranging from California and New York to North Dakota and North Carolina.
The AGs wrote that the challengers’ view would “violate basic principles of cooperative federalism by surprising the States with a dramatic hidden consequence of their Exchange election.” They continued, “Every State engaged in extensive deliberations to select the Exchange best suited to its needs. None had reason to believe that choosing a federally-facilitated Exchange would alter so fundamental a feature of the ACA as the availability of tax credits. Nothing in the ACA provided clear notice of that risk, and retroactively imposing such a new condition now would upend the bargain the States thought they had struck.”