I am a retired personal injury attorney, having practiced personal injury law for thirty five years. Personal injury lawyers produce most of the law on insurance. It is what we do every day. An insurance contract is an indemnity contract. Insurance created by statute also creates an indemnity scenario. Indemnity is the legal term for one party taking over obligations of another party. When Congress enacted the ACA, it created several indemnity scenarios. But no court has addressed the issue of ACA indemnity at all as far as I know. It’s the elephant in the room no one is talking about. It’s shocking to this personal injury lawyer.
Applying the principals of indemnity construction to the ACA could be a real game changer and put the case back in a safe posture. See why I think so after the orange break.
Applying the principals of indemnity construction to the ACA would really put the opponents of the ACA in a real box; one that they are not in now. Discussions of indemnity make this much more of insurance case and a Court’s decision on indemnity could have huge insurance repercussions that are not envisioned now. The case is huge already, but an indemnity decision makes it much bigger. Why? Indemnity law is well established and has been relied upon for hundreds of years. The insurance industry is founded on it.
The Fourth Circuit in King v. Burwell upheld the ACA. As you know, the Fourth Circuit’s decision was appealed to the Supreme Court and that case is about to be argued. The Fourth Circuit's ruling is consistent with recognized indemnity construction. Other cases that held to the contrary are not.
The Fourth Circuit’s opinion is very well reasoned; but it never mentions indemnity, though it dances around the subject. Its opinion could have been significantly strengthened by the application of the rules of indemnity construction. Under principals of indemnity, when one insurance company is required to indemnify (take on the obligations) of another, it not only stands in the shoes of the indemnified insurance company, it can sue and be sued in the indemnified insurance company's name. Being able to sue or be sued in somebody else’s name. Think about that for a second. That alone tells you something about the uniqueness of indemnity. That is why insurance is hardly ever mentioned in personal injury cases in most jurisdictions and one obvious reason why indemnity law is such a “big fucking deal” (to quote Biden).
I mentioned above that the ACA has several indemnity scenarios. Here’s the biggie. When the federal government is required to step in and provide insurance that a state could have provided but decided not to, an indemnity scenario is created, because the Federal Government has taken on the obligations of the state that opted out. The federal government “stands in the shoes” (stands in the shoes is classic indemnity language) of the state. The Fourth Circuit acknowledged that the Federal government stood in the shoes of the states that had opted out, and though it used the classic language, it did not use any indemnity analysis to support its opinion. Since the Fourth Circuit observed that the federal government “stands in the shoes” of the state, the application of indemnity construction to the case certainly makes sense, for two reasons: it helps to decipher the intent of Congress and helps justify the reasonableness of the IRS’ interpretation. These are the two issues the Supreme Court will be likely be addressing when it decides the case.
Under indemnity law, indemnity is either full or limited. If the indemnity that Congress gave the states was a full indemnity, the Federal Government acquires all the rights, benefits and privileges that the state has in order to take on all of the state's obligations. Under full indemnity an insured or beneficiary does not lose any rights because the intent is to provide all of the benefits, privileges and rights the indemnified entity was required to provide.
Here is the really important part, and where the laws of indemnity construction really help the government’s position. Full indemnity is always implied. The rules of indemnity constructions say it does not need to be expressly stated. That is not the case in ordinary rules of statutory or contract construction.
The argument of the ACA opponents is predicated on the fact that Congress did not expressly state that people who were forced onto federal exchanges got tax subsidies like the people on state exchanges did. Under general rules of construction, it makes a pretty good argument that Congress intended to treat state and federal exchanges differently. But under the rules of indemnity construction, it is implied that both exchanges were created equal.
Under the laws of indemnity, Congress did not have to expressly say that the individuals who were forced onto a federal exchange also got tax credits. Under the law of indemnity that was implied. Congress does not need to expressly state something that is implied. Congress is presumed to know the law. So from the laws of indemnity, Congress’ intent can be presumably be determined. And here’s the killer. Specific rules of construction (like those pertaining to indemnity) trump general rules of construction.
And that’s not all. On the other hand, for a limited indemnity, the limitations must be expressly stated. So a silent statute implies full indemnity, not partial indemnity. Under indemnity construction, if the Congress wanted to limit the indemnity of the Federal Government, Congress had to expressly say so. It said nothing of the kind.
The ACA gave the states a full indemnity from the federal government. So under indemnity construction, the insureds should have all the rights, benefits and privileges they would have had if their state formed its own exchange. They should get their tax subsidies.
I really think someone needs to get to the government’s lawyers and see if they can work an indemnity argument into oral argument. I have been trying without much success to get my voice heard. I am hoping I will get an audience here and maybe there are people here with channels to get to people who can consider my thoughts. The ACA needs to be upheld, again.
This is not just a legal exercise for me. This is also very personal. Last year my wife and I were able to help get insurance for my mentally ill 30 year old daughter for the first time since she was 21. She now is getting decent care and she qualifies for a subsidy. We are in a state that did not set up exchanges and did not expand Medicaid. She will lose all her subsidies if the Court does not uphold the ACA a second time. And there will be millions like her.