Wednesday, July 23, 2014
Much of the media and blog discussion has framed the legal debate as being between (a) focusing on the literal wording of the statute, and (b) looking to broader contextual or purpovist forms of statutory interpretation. There is some truth to this. But I think the view that the literal wording of the statute supports the majority’s decision in Halbig is wrong.
Central to Obamacare are new Exchanges designed to offer insurance plans to individuals and small businesses, and premium tax credits offered to make these insurance plans affordable for low and moderate income Americans. Section 36B of the Affordable Care Act (“Obamacare” or the “ACA”) states that to be eligible for the premium tax credits, a taxpayer must enroll in a qualified health plan offered “through an Exchange established by the State under 1311.” The majority decision in Halbig thus holds that premium tax credits are only to be available through Exchanges established by a state, not Exchanges established by the federal government.
Based solely on the language above, it is easy to see why so many have thought that the narrow language of the statute supports the position reached by the majority in Halbig. However, it is crucial to understand that the term “Exchange” is a defined term in the statute. Section 1311(d)(1) requires that “[a]n Exchange shall be a governmental agency or nonprofit agency that is established by a State.”
The majority in Halbig discuss the language of Section 1311(d)(1) at length and provide numerous arguments for why they decide that this language should not be determinative. I think the majority makes a reasonable case, but I ultimately find their reasoning unconvincing. I discussed some of the reasons why in an Essay co-authored with Darien Shanske, available here.
I lack the time today to comprehensively review the majority’s arguments in the Halbig decision. But a few words of context might be helpful.
From 2010 through 2012, I took a leave from Berkeley Law to accept a position at the Treasury Department’s Office of Tax Policy. As part of that position, I worked on the regulations challenged in the Halbig and King cases. I started at Treasury after the ACA legislation had passed Congress and had been signed by the President, but I worked closely with many people who were involved in drafting the legislation.
When I arrived in Washington, most everyone was referring to the Exchanges as “state-run” Exchanges, or “state Exchanges”, or “state-established” Exchanges. Even when discussing the possibility that the federal government might need to step in to establish Exchanges on behalf of some of the states, most everyone still referred to the Exchanges as “state run or established” Exchanges. To this day, my files related to the Exchanges have the header “state-run Exchanges.” In other words, it was simply understood by everyone I met who was involved in drafting the legislation, that the phrases “state-run Exchanges” or “state-established Exchanges” were terms of art meant to refer to all Exchanges. Importantly, the structure and language of the statute is consistent with these forms of expression.
Far more can be (and has been) said on these issues. Again, I refer interested readers to my prior essay on this topic. I may write more as I have time. For now, I’ll end by emphasizing again the language of Section 1311(d)(1) setting forth the requirement that “[a]n Exchange shall be a governmental agency or nonprofit agency that is established by a State.” The provision instructing the federal government to establish an “Exchange” when states fail to do so reads: “the Secretary shall (directly or through agreement with a no-tfor-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.”
Ultimately, the textual question in these cases comes down to whether the language of Section 1311(d)(1) should govern or only the language of 36B. Arguments have been made for prioritizing the implications of each of these. But, in my view, any discussion that mentions only the language of 36B and not the language of 1311 is missing the heart of the issue.