eBay Huckster, let me begin by clarifying my position. I believe that IRC s. 36B only authorizes tax credits for those who have enrolled in an insurance policy on an exchange established by a state, and not on an exchange established by HHS. I believe this because thats what the text says. This interpretation is not tortured, despite that resort must be made to several definitions to understand the section. Instead, my interpretation is the only straightforward interpretation of the section. Here are the relevant provisions of section 36B:
IRC s. 36B(a) said:
In the case of an applicable taxpayer, there shall be allowed as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the premium assistance credit amount of the taxpayer for the taxable year.
This is the key operative provision of section 36B. It tells us who gets a credit (an applicable taxpayer) and the value of the credit that person is entitled to (equal to the premium assistance credit amount). Those phrases Ive bolded are defined terms.
Who gets a credit?
IRC s. 36B(c)(1)(A) said:
The term applicable taxpayer [generally] means, with respect to any taxable year, a taxpayer whose household income for the taxable year equals or exceeds 100 percent but does not exceed 400 percent of an amount equal to the poverty line for a family of the size involved.
Simple enough.
What is the value of the credit?
IRC s. 36B(b)(1) said:
The term premium assistance credit amount means, with respect to any taxable year, the sum of the premium assistance amounts determined under paragraph (2) with respect to all coverage months of the taxpayer occurring during the taxable year.
Again, the bolded are defined terms, and these terms are what cause trouble. First, a taxpayer cannot have any coverage months if he or she has not enrolled in a qualified health plan through an Exchange established by [a] State under section 1311 (see below). If a month is not a coverage month, then the premium assistance amount for that month is not included in calculating the premium assistance credit amount for the taxable year (see above, s. 36B(b)(1)).
IRC s. 36B(c)(2)(A) said:
The term coverage month [generally] means, with respect to an applicable taxpayer, any month if
(i) as of the first day of such month the taxpayer, the taxpayers spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) [see below] that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act, and
(ii) the premium for coverage under such plan for such month is paid by the taxpayer (or through advance payment of the credit under subsection (a) under section 1412 of the Patient Protection and Affordable Care Act).
Note that the reference to the State in 36B(c)(2)(A)(i) refers to the state within which a qualified health plan is offered in the individual market (because of its reference to 36B(b)(2)(A)).
For a moment, lets pretend that a coverage month is any month during which an applicable taxpayer is enrolled in a qualified health plan, regardless of who established the Exchange from which the taxpayer purchased the plan. That doesnt solve the problem, because the method of calculating the premium assistance amount also requires that the plan be enrolled in through an Exchange established by the Stateotherwise, its formula will spit out an amount equal to $0.
IRC s. 36B(b)(2) said:
The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of
(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayers spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act, or
(B) the excess (if any) of
(i) the adjusted monthly premium for such month for the applicable second lowest cost silver plan with respect to the taxpayer, over
(ii) an amount equal to 1/12 of the product of the applicable percentage and the taxpayers household income for the taxable year.
(Regarding subsection A, note the subtle change in language between the two phrases relating to States. The first is within a State, and the second is by the State. Its obvious why the latter phrase exchanges the for a, since its referring back to the State identified in the first phrase. Likewise, its obvious why the former phrase uses within instead of bythe ACA does not call on states to act as health insurers. But why does the latter replace within with by, if Congress meant to say within in each? Courts presume that Congress, in using two different terms, intends two different meanings.)
So, Congress, in expressing how much of a credit an applicable taxpayer is entitled to, stated that that figure is the sum of the premium assistance amounts (which require that a qualified health plan be enrolled in through an Exchange established by [a] State) for all coverage months (which also require that a qualified health plan be enrolled in through an Exchange established by [a] State). This was no slip of the pen.
Note that at this point, I havent said one word about threats, incentives, or the Spending Clause. I dont need to. The text is enough, and the text is clear. (If you think that one or more other provisions create an ambiguity, point them out (or refer to a source that does so), and I'll address them.)
Responses
Now Ill respond to the other points you raise.
The entirety of the elected GOP voted in favor of H.R. 4 in the 112th (itself a slight modification of H.R. 705), which was scored by the CBO on the premise that subsidies were universal in scope several months into a political landscape in which states had already declined to set up their own - an indication that at worst, they believed that subsidies *might not* be restricted to state exchanges in moving to capture more revenue from their repayment.
This gets several things wrong. First, H.R. 4 (enacted as Pub. L. 112-9) says nothing (and implies nothing) about whether credits are available to applicable taxpayers who are covered by qualified health plans enrolled in through an Exchange established by HHS. Instead, it simply amends one subsection of 36B to increase the amount that a taxpayer eligible for credits would have to pay back if the advance credits exceeded the credit to which he or she was entitled. But, I dont think your point in raising the law was to say otherwise. Second, Im not sure that a single state made a decision regarding establishing a health care exchange by mid-2011, when this statute was enacted. Not even Texas made a decision until July 2012. Third, the only Cost Estimate by the CBO Ive found related to H.R. 4 is
this one, which says nothing about the change to section 36B, which was added to the bill later.
In particular, you can feel free to explain, in as plain a form of language as possible, how Chevron deference does
not apply to this case, given that:
- everyone except for the plaintiffs (and the relevant organizations filing amici curiae) - a group which includes a substantial number of governments and their officials otherwise overtly opposed to the existence of the law - seems to be in agreement that "subsidies go to all states" was at least a plausible interpretation of the sections in question, given that...
- ...rather unlike NFIB v. Sebelius, there appears to have been no credible threat made by members of Congress or the Cabinet to deny subsidies to states that did not opt to create their own exchanges, as Sargent's post details.
It seems to me that taken together, both of these points imply that Congressional intent was not unambiguous (in which case the SCOTUS should grant "Chevron"), unless you are seriously arguing that Congress made a clear-cut threat that, simultaneously, no one seems to be able to find with any measure of clarity.
A court grants deference to an agencys interpretation of a law only when the law is ambiguous and the agencys interpretation is a reasonable one. In this case, the law is not ambiguous (see above), so no deference is due.
You can point to people misreading and misunderstanding the text of the law all day, but that doesnt change that the text simply leaves no room for debate. We dont need to rely on how others have interpreted the textwe have the text and can read it for ourselves. Established by [a] State under section 1311 cannot mean established by the Secretary of HHS under section 1321 (or 1311, for that matter).
EDIT: Response to Fourth Circuit in King
Because you complained that I haven't addressed the Fourth Circuit's holding in
King, let me do so now.
The Fourth Circuit held that the law is ambiguous as to whether tax credits are available on exchanges established by the federal government, and the IRS rule is a reasonable interpretation of the statute. In reaching the former conclusion, the court relied on a number of provisions in the ACA outside of section IRC section 36B. First, it interpreted the requirement that an "Exchange . . . be a governmental agency or nonprofit entity that is established by a State" as definitional--i.e., transforming any exchange, regardless by whom established, into an exchange established by a state. This doesn't make sense, for a couple of reasons: (1) the subsection is titled "Requirements," not "Definitions;" (2) "Exchange" is
defined elsewhere in the statute; and (3) this reading would permit a state to create a for-profit entity to serve as the Exchange, since the for-profit entity would be transfigured into a nonprofit by virtue of this purported definition.
Second, the court interpreted the
(actual) definition of "Exchange"--"an American Health Benefit Exchange established under section 18031 of this title [i.e., 1311 of the Act]"--to transform an exchange established by the Secretary of HHS into an exchange established by a state. Third, the court recites the government's argument that the requirement that HHS establish "such exchange" under section 1321 means that HHS establishes a state-established exchange. The D.C. Circuit panel in
Halbig addressed both of these arguments cogently, as I pointed out
here:
Halbig said:
The phrase "such Exchange" has twofold significance. First, the word "such" . . . signifies that the Exchange the Secretary must establish is the "required Exchange" that the state failed to establish. In other words, "such" conveys what a federal Exchange is: the equivalent of the Exchange a state would have established had it elected to do so. . . . If we import [the statutory definition of "Exchange"] into the text of section 1321, the provision directs the Secretary to "establish . . . such American Health Benefit Exchange established under [section 1311 of the ACA] within the State." This suggests . . . that the Secretary[, in establishing an Exchange,] . . . acts under section 1311, even though her authority appears in section 1321. Thus, section 1321 creates equivalence between state and federal Exchanges in two respects: in terms of what they are and the statutory authority under which they are established.
The problem confronting the IRS Rule is that subsidies also turn on a third attribute of Exchanges: who established them. . . . Of the three elements of [section 36B of the IRC]--(1) an Exchange (2) established by the State (3) under section 1311--federal Exchanges satisfy only two: they are Exchanges established under 1311.
Two additional points about
1321. The title of the subsection containing the "such Exchange" language is "Failure to establish Exchange or implement requirements." So it would seem that an "Exchange established by the State" and an exchange established by HHS are mutually exclusive--HHS only steps in when the state
fails to establish an exchange. In addition, note what it is the Secretary of HHS is instructed to do: "establish and operate such Exchange within the State." There's that phrase again: "within the State." So, Congress knew how to refer to a state-specific Exchange as an Exchange "within the State," yet, despite its use of the phrase earlier in 36B to refer to the availability of qualified health plans on the individual market, Congress declined to do so in defining the value of tax credits available to an applicable taxpayer.
The court also refers to the government's arguments concerning reporting requirements and "qualified individuals," both of which were addressed in
Halbig (and which I quote because I'm tired of writing--in case that wasn't clear already from the sloppiness of this Edit):
Halbig said:
The government first argues that we must uphold the IRS Rule to avoid rendering language in 26 U.S.C. s. 36B(f) superfluous. . . . As relevant here, section 36B(f) also requires "each Exchange"--i.e., both state and federal Exchanges--to report certain information to the government. . . . The government contends that these reporting requirements assume that credits are available on federal Exchanges, and it argues that the requirements would be superfluous, even nonsensical, as applied to federal Exchanges if we were to reject that assumption.
Not so. . . . [H]olding that credits are unavailable on federal Exchanges would not convert the specific reporting requirements concerning credits into an "'empty gesture.'" . . . Those requirements would still allow the reconciling of credits on state Exchanges; as applied to federal Exchanges, they would simply be over-inclusive. Over-inclusiveness, however, remains a problem even if we were to agree that section 36B allows credits on federal Exchanges. Section 36B(f)(3), after all, mandates reporting "with respect to any health plan provided through the Exchange," . . . even though only plans purchased by taxpayers with incomes between 100 and 400 percent of the federal poverty line may be subsidized. . . . A weakness common to both views of the availability of credits hardly serves as a basis for choosing between them.
FN5. Appellants also suggest that the information collected from federal Exchanges could be useful for the "Study on Affordable Coverage" mandated by the ACA in that same section.
. . .
If this provision is given its plain meaning, then the 36 states with federal Exchanges . . . have no qualified individuals. That outcome is absurd, the government argues, because in its view section 1312 restricts access to Exchanges to qualified individuals alone. . . . The absence of qualified individuals would mean that federal Exchanges have no customers and therefore no purpose. . . .
The government, however, tilts at windmills. It assumes that when section 1312(a) states that "[a] qualified individual may enroll in any qualified health plan available to such individual and for which such individual is eligible," . . . it means that only a qualified individual may enroll in such a plan. The obvious flaw in this interpretation is that the word "only" does not appear in the provision. We have repeated emphasized that it is "not our role" to "engage in a statutory rewrite" by "insert[ing] the word 'only' here and there." . . . On this reading, giving the phrase "established by the State" [sic] its plain meaning creates no difficulty, let alone absurdity. Federal Exchanges might not have qualified individuals, but they would still have customers--namely, individuals who are not "qualified individuals."
Several other provisions in section 1312 imply that non only "qualified individuals" may participate in an Exchange.
