Wednesday, July 23, 2014

Halbig v. Burwell, Appeal from United States District Court for District of Columbia (No. 1:13-cv-00623), July 22, 2014

The below is an edited version of the Halbig case for people would would like to read enough of it to know what the issues, arguments and rules are but do not wish to read all 72 pages.  For more coverage on the Halbig decision see my post here and see the full text of the case here.  My edited version of King v. Burwell can be read here.  My limited commentary below is in [blue].  The rest of the words are the court's.


Pg. 4:  Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia.... But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act....

Appellants are a group of individuals and employers residing in states that did not establish Exchanges. For reasons we explain more fully below, the IRS’s interpretation of section 36B makes them subject to certain penalties under the ACA that they would rather not face. Believing that the IRS’s interpretation is inconsistent with section 36B, appellants challenge the regulation under the Administrative Procedure Act (APA), alleging that it is not “in accordance with law.”...

Pg. 8: ... [T]he IRS acknowledged that “[c]ommentators disagreed on whether the language in section 36B(b)(2)(A) limits the availability of the premium tax credit only to taxpayers who enroll in qualified health plans on State Exchanges,” but asserted without elaboration that “[t]he statutory language of section 36B and other provisions of the [ACA],” as well as “the relevant legislative history,” supported its view....

This broader interpretation has major ramifications. By making credits more widely available, the IRS Rule gives the individual and employer mandates—key provisions of the ACA—broader effect than they would have if credits were limited to state-established Exchanges. The individual mandate requires individuals to maintain “minimum essential coverage” and, in general, enforces that requirement with a penalty.... The penalty does not apply, however, to individuals for whom the annual cost of the cheapest available coverage, less any tax credits, would exceed eight percent of their projected household income.... By some estimates, credits will determine on which side of the eight-percent threshold millions of individuals fall.... Thus, by making tax credits available in the 36 states with federal Exchanges, the IRS Rule significantly increases the number of people who must purchase health insurance or face a penalty.

Issue and Summary of Arguments

Pgs. 14-16:  On the merits, this case requires us to determine whether the ACA permits the IRS to provide tax credits for insurance purchased through federal Exchanges. To make this determination, we begin by asking “whether Congress has directly spoken to the precise question at issue,” for if it has, we must give effect to its unambiguously expressed intent. Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 842-43 (1984). The text of section 36B is only the starting point of this analysis. That provision is but one piece of a vast, complex statutory scheme, and we must consider it both on its own and in relation to the ACA’s interconnected provisions and overall structure so as to interpret the Act, if possible, “as a symmetrical and coherent scheme.” See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000). ...

Although both appellants and the government argue that the ACA, read in its totality, evinces clear congressional intent, they dispute what that intent actually is. Appellants argue that if taxpayers can receive credits only for plans enrolled in “through an Exchange established by the State under section 1311 of the [ACA],” then the IRS clearly cannot give credits to taxpayers who purchased insurance on an Exchange established by the federal government. After all, the federal government is not a “State,” see 42 U.S.C. § 18024(d) (defining “State” to “mean[] each of the 50 States and the District of Columbia”), and its authority to establish Exchanges appears in section 1321 rather than section 1311, see id. § 18041(c)(1). The government counters that appellants take a blinkered view of the ACA and that sections 1311 and 1321 of the Act establish complete equivalence between state and federal Exchanges, such that when the federal government establishes an Exchange, it does so standing in the state’s shoes. Furthermore, the government argues, whereas appellants’ construction of section 36B renders other provisions of the ACA absurd, its own view brings coherence to the statute and better promotes the purpose of the Act.

Short Answer

We conclude that appellants have the better of the argument: a federal Exchange is not an “Exchange established by the State,” and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges. We reach this conclusion by the following path: First, we examine section 36B in light of sections 1311 and 1321, which authorize the establishment of state and federal Exchanges, respectively, and conclude that section 36B plainly distinguishes Exchanges established by states from those established by the federal government. We then consider the government’s arguments that this construction generates absurd results but find that it does not render other provisions of the ACA unworkable, let alone so unreasonable as to justify disregarding section 36B’s plain meaning. Finally, turning to the ACA’s purpose and legislative history, we find that the government again comes up short in its efforts to overcome the statutory text. Its appeals to the ACA’s broad aims do not demonstrate that Congress manifestly meant something other than what section 36B says.


The problem confronting the IRS Rule is that subsidies also turn on a third attribute of Exchanges: who established them. Under section 36B, subsidies are available only for plans “enrolled in through an Exchange established by the State under section 1311 of the [ACA].” 26 U.S.C. § 36B(c)(2)(A)(i) (emphasis added); see also id. § 36B(b)(2)(A). Of the three elements of that provision— (1) an Exchange (2) established by the State (3) under section 1311—federal Exchanges satisfy only two: they are Exchanges established under section 1311. Nothing in section 1321 deems federally-established Exchanges to be “Exchange[s] established by the State.” This omission is particularly significant since Congress knew how to provide that a non-state entity should be treated as if it were a state when it sets up an Exchange. In a nearby section, the ACA provides that a U.S. territory that “elects . . . to establish an Exchange . . . shall be treated as a State.”2 42 U.S.C. § 18043(a)(1). The absence of similar language in section 1321 suggests that even though the federal government may establish an Exchange “within the State,” it does not in fact stand in the state’s shoes when doing so. See NFIB, 132 S. Ct. at 2583 (“Where Congress uses certain language in one part of a statute and different language in another, it is generally presumed that Congress acts intentionally.” (citing Russello v. United States, 464 U.S. 16, 23 (1983))).

[Because the court concludes that the statute is clear on its face and that subsidies are only intended in state exchanges, it notes that it is arguable but doubtful that precedent requires the court to go any further.  However, for the sake of argument, the court does look briefly at the congressional intent and notes that even if they did make it to this subsequent prong of analysis, it would conclude the same way.] 

Pg. 31: [A]ssuming arguendo that it is proper to consult legislative history when the statutory text is clear, we consider what light the ACA’s history offers....

Pg. 32: [I]t would be a strange canon of statutory construction that would require Congress to state in committee reports or elsewhere in its deliberations that which is obvious on the face of a statute.”). Instead, only when “apparently plain language compels an ‘odd result’” might we look to legislative history to ensure that the “‘literal application of a statute will [not] produce a result demonstrably at odds with the intentions of its drafters.’” Engine Mfrs. Ass’n, 88 F.3d at 1088 (quoting Public Citizen, 491 U.S. at 454, and United States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989)).

Pgs. 33-34: The Senate Committee on Health, Education, Labor, and Pensions (HELP) proposed a bill that specifically contemplated penalizing states that refused to participate in establishing “American Health Benefit Gateways,” the equivalent of Exchanges, by denying credits to such states’ residents for four years. See Affordable Health Choices Act, S. 1679, 111th Cong. § 3104(a), (d)(2) (2009). This is not to say that section 36B necessarily incorporated this thinking; we agree that inferences from unenacted legislation are too uncertain to be a helpful guide to the intent behind a specific provision. See Village of Barrington v. Surface Transp. Bd., 636 F.3d 650, 666 (D.C. Cir. 2011). But the HELP Committee’s bill certainly demonstrates that members of Congress at least considered the notion of using subsidies as an incentive to gain states’ cooperation. [Bold italics are mine.] 

Pg. 40: As the Supreme Court explained just this term, “an agency may not rewrite clear statutory terms to suit its own sense of how the statute should operate.” UARG, 134 S. Ct. at 2446. And neither may we. “The role of th[e] [c]ourt is to apply the statute as it is written—even if we think some other approach might ‘accor[d] with good policy.’” Burrage v. United States, 134 S. Ct. 881, 892 (2014) (quoting Comm’r v. Lundy, 516 U.S. 235, 252 (1996)) (third alteration in original); see also Lewis v. City of Chicago, 560 U.S. 205, 217 (2010) (“[I]t is not our task to assess the consequences of each approach [to interpreting a statute] and adopt the one that produces the least mischief. Our charge is to give effect to the law Congress enacted.”) ...

Conclusion and Holding

Pg. 41: The fact is that the legislative record provides little indication one way or the other of congressional intent, but the statutory text does. Section 36B plainly makes subsidies available only on Exchanges established by states. And in the absence of any contrary indications, that text is conclusive evidence of Congress’s intent. Cf. Ethyl Corp. v. EPA, 51 F.3d 1053, 1063 (D.C. Cir. 1995) (“At best, the legislative history is cryptic, and this surely is not enough to overcome the plain meaning of the statute.”). To hold otherwise would be to say that enacted legislation, on its own, does not command our respect—an utterly untenable proposition. Accordingly, applying the statute’s plain meaning, we find that section 36B unambiguously forecloses the interpretation embodied in the IRS Rule and instead limits the availability of premium tax credits to state-established Exchanges.

Dissenting Opinion

Pg. 71-72: The Supreme Court has made it clear that “[t]he plainness or ambiguity of statutory language is determined by reference to the language itself, the specific context in which that language is used, and the broader context of the statute as a whole.” Robinson, 519 U.S. at 341. We cannot review a “particular statutory provision in isolation . . . . It is a 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.” Nat’l Ass’n of Home Builders, 551 U.S. at 666. Following these precepts and reading the ACA as a whole, it is clear that the statute does not unambiguously provide that individuals who purchase insurance from an Exchange created by HHS on behalf of a State are ineligible to receive a tax credit. The majority opinion evinces a painstaking effort – covering many pages – attempting to show that there is no ambiguity in the ACA. The result, I think, is to prove just the opposite. Implausible results would follow if “established by the State” is construed to exclude Exchanges established by HHS on behalf of a State. This is why the majority opinion strains fruitlessly to show plain meaning when there is none to be found.

The IRS’s and HHS’s constructions of the statute are perfectly consistent with the statute’s text, structure, and purpose, while Appellants’ interpretation would “crumble” the Act’s structure. Therefore, we certainly cannot hold that that the agencies’ regulations are “manifestly contrary to the statute.” This court owes deference to the agencies’ interpretations of the ACA. Unfortunately, by imposing the Appellants’ myopic construction on the administering agencies without any regard for the overall statutory scheme, the majority opinion effectively ignores the basic tenets of statutory construction, as well as the principles of Chevron deference. Because the proposed judgment of the majority defies the will of Congress and the permissible interpretations of the agencies to whom Congress has delegated the authority to interpret and enforce the terms of the ACA, I dissent.