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Media Alerts - Halbig v. Burwell
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July 22, 2014
  Halbig v. Burwell
Headline: IRS health insurance tax credits available only to residents of states that established their own health care Exchanges.

Area of Law: Affordable Care Act; Administrative Procedure Act

Issue(s) Presented: Whether the Affordable Care Act permits the IRS to provide tax credits for insurance purchased through federal Exchanges.

Brief Summary: The Patient Protection and Affordable Care Act (ACA) was enacted in 2010 as a comprehensive effort "to increase the number of Americans covered by health insurance and decrease the cost of health care." The ACA focuses on helping individuals purchase health insurance through Exchanges, which, among other things, determine what health plans satisfy federal and state standards and operate websites that facilitate enrollment. Fourteen states and the District of Columbia have established Exchanges; the remaining states rely on Exchanges operated by the federal government through the Secretary of Health and Human Services. Under section 36B of the Internal Revenue Code, enacted as part of the ACA, qualified individuals who purchase insurance through an Exchange receive a tax credit to offset some of the cost of their insurance. The text of section 36B defines the amount of the credit with reference to "an Exchange established by the State under 1311 of the [ACA]." In May 2012, the Internal Revenue Service promulgated a regulation interpreting section 36B to allow credit for insurance purchased through either a state- or federally-established Exchange.

Appellants, a group of individuals and employers residing in states that did not establish state Exchanges, challenged that regulation under the Administrative Procedure Act, claiming that it was inconsistent with the language of section 36B and thus "not in accordance with law." The district court held that the ACA's text, structure, purpose, and legislative history make "clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges," and that even if the ACA were ambiguous, the regulation would represent a permissible construction entitled to deference under Chevron.

The United States Court of Appeals for the District of Columbia Circuit reversed the district court decision. The court found that the plain language of section 36B required an Exchange to be state-created in order to trigger the subsidies. While the court conceded that section 1321 of the ACA, which directs the HHS Secretary to establish an Exchange when a state is unable or unwilling to do so, created equivalence between state and federal Exchanges in some respects, it held that the equivalence did not go as far as finding "federally-established Exchanges" to be, in fact or legal fiction, "Exchanges established by the State."

The court rejected the government's argument that adopting this interpretation of section 36B would render other sections of the ACA absurd. Warning that an overbroad application of the absurdity doctrine "contradicts the rule-of-law objectives implicit in the Constitution's strict separation of lawmaking from judging," the court determined that the government's contention that giving effect to the literal meaning of the text of 36B would make other sections of the statute superfluous or nonsensical did not cross the "high threshold of unreasonableness" necessary to conclude that the statute did not mean what it said.
Turning to the legislative history of the ACA, the court found that the government failed to present evidence that the literal meaning of the stature was "demonstrably at odds with the intentions of [its]drafters." The court also found the government's argument that section 36B should be read to harmonize with the larger goals of the ACA, which depend on the availability of subsidies, unpersuasive, concluding that the legislative record provided too little indication of intent to supersede the statutory text.

Judge Edwards argued in dissent that section 36B was ambiguous when read in the larger context of the ACA, and that the regulation treating state and federally-created Exchanges the same for purposes of the subsidy was a permissible interpretation of the statute under Chevron.

For the full text of the opinion, please visit

Panel (if known): Griffith, Edwards, and Randolph

Argument Date (if known): March 25, 2014

Date of Issued Opinion: July 22, 2014

Docket Number: 14-5018

Decided: Reversed

Case Alert Author: Albertine Guez

Counsel (if known): Michael A. Carvin, Yaakov M. Roth, and Jonathan Berry for appellants. Stuart F. Delery, Ronald C. Machen, Beth S. Brinkmann, Mark B. Stern, and Alisa B. Klein for appellees.

Author of Opinion: Griffith

Dissent by: Edwards

Case Alert Circuit Supervisor: Elizabeth Beske, Ripple Weistling

    Posted By: Ripple Weistling @ 07/22/2014 05:41 PM     DC Circuit  

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