Things to Read on the Afternoon of January 22, 2014
Massive Resistance Watch: The View from The Roasterie LXXXI: January 23, 2014

Lunchtime Must-Read: Everything by Timothy Jost About the ACA on Health Affairs

Timothy Jost: All posts by Timothy Jost on Health Affairs Blog: The most recent:

On January 15, 2014, the Affordable Care Act won a very important legal victory in Halbig v. Sebelius. Judge Paul Friedman of the District Court for the District of Columbia held that the ACA unambiguously supports an IRS regulation allowing the agency to issue premium tax credits to individuals enrolled through federal, as well as state, exchanges.

This is the first ruling in a series of challenges to the IRS rule brought by individuals and employers in the District of Columbia and Virginia, as well as the attorneys general of Oklahoma and Indiana. The plaintiffs have already reportedly appealed Judge Friedman’s decision, but his reasoning is persuasive, and I expect that not only will his decision be upheld but that the judges in the other cases will follow his reasoning.

The... ACA authorizes the IRS to provide premium tax credits to individuals with household incomes between 100 and 400 percent of the federal poverty level who are not eligible for other minimum essential coverage (such as affordable and adequate employer coverage, Medicaid, or Medicare)... [and] who purchase coverage through the exchanges.... Two subsections of the provision of the ACA section authorizing premium tax credits, however, provide that tax credits are available for months in which an individual is enrolled in a qualified health plan 'through an Exchange established by the State under 1311; of the ACA. The plaintiffs in Halbig argued that this provision bars the IRS from issuing premium tax credits to individuals who enroll in qualified health plans through federal, as opposed to state, exchanges.... A ruling for the plaintiffs would have been a major setback for the ACA.... There is good reason to believe that the individual insurance market would collapse in federal-exchange states if the ACA’s market reform provisions (which are not challenged in this litigation) remained in place in those states--requiring insurers to cover individuals with pre-existing conditions without increased premiums--but individuals in those states could not get premium tax credits, the employer mandate did not apply, and the individual mandate did not fully apply.... This is what has reportedly happened in some of the territories where the market reforms apply but premium tax credits are not available and there is no individual or employer mandate....

Judge Friedman, however, had little trouble disposing of plaintiffs’ arguments... under the Chevron rule.... Judge Friedman did not need to reach the question of whether the IRS construction of the statute was permissible, or whether the IRS reached its construction through reasoned decision-making, because, the judge held, the ACA unambiguously authorizes federal exchanges to issue premium tax credits....

Judge Friedman... noted that the statute authorizes premium tax credits for 'applicable taxpayers'... not distinguishing between taxpayers who live in federal or state exchange states.... The ACA... expressly provides... that if states decline the invitation to establish the 'required exchange', the federal government must establish 'such' exchange.... Judge Friedman... noted that... the statute requires federal exchanges as well as state exchanges to report to the IRS information on taxpayers who receive advance premium tax credits.... This makes no sense if enrollees through federal exchanges cannot receive premium tax credits. Moreover, the ACA defines qualified individuals who can purchase insurance through exchanges as individuals who “reside in a state that established an Exchange.” If HHS cannot establish a federal exchange that effectively becomes an exchange “established by the state,” the federal exchange could not even enroll individuals in insurance.... Lastly, Judge Friedman turned to the legislative history.... The court concluded:

In sum, the Court finds that the plain text of the statute, the statutory structure, and the statutory purpose make clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges. What little relevant legislative history exists further supports this conclusion and certainly--despite plaintiffs’ best efforts to suggest otherwise--it does not undermine it....

Up next. The next judge to rule on this issue will be Judge James Spencer in Richmond, Virginia, who is considering King v. Sebelius, which has been fully briefed and is awaiting a decision. I will be surprised if he reaches a different result.