Administration supporters argue that the plaintiffs are ignoring the whole text of the ACA and focusing on four words — “established by the State” — in isolation. But the disputed ACA section 1421 authorizes subsidies for enrollees “through an Exchange established by the State under section 1311” (emphasis added), the section that directs states to establish health exchanges. Federal exchanges are authorized for states that fail to establish an exchange under a different section, 1321, which is conspicuously absent from section 1421. The IRS rule would only make sense if section 1421 provided subsidies for exchanges established under section 1311 and 1321 or if it specified exchanges established by the state and federal governments. Congress could have easily inserted such language.
Opponents of the lawsuit claim no reputable legal scholar takes the plaintiffs’ legal arguments seriously (the New York Times called them “baloney”). Yet, in two of the three challenges to the IRS regulation decided thus far, federal courts have sided with the King plaintiffs. Only the Fourth Circuit in King v. Burwell has disagreed and the court conceded it was a close question because the statutory language is ambiguous.