To the extent Adler and Cannon claim that, regardless of intent, the law simply and unequivocally limits subsidies to exchanges “established by the state,” and the Court is bound by that language, that claim simply is not persuasive. Section 36B does not even purport to address where subsidies are available but rather details how to compute those subsidies. And the clear text of the law in Section 1321 supports that interpretation by requiring HHS to create the very same exchange where federal subsidies are available.
Moreover, Section 36B(a), in the words of one of this country’s leading experts on statutory interpretation, “expressly provides that the premium tax credits shall be allowed to any “applicable taxpayer,” who “is defined as a taxpayer whose annual household income is between 100% and 400% of the federal poverty level.” In other words, there is simply no limitation of subsidies to state exchanges in the actual text of the ACA, despite Adler’s and Cannon’s repeated attempts to find one.
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Nine lower court judges have resolved the legal issues in this case. Three of those judges held for the plaintiffs while the other six ruled for the government. All three judges who ruled against the government were appointed by Republican presidents.* Two sat on an appeals court panel in DC but their decision was vacated by the full appellate court. The third was a trial judge in Oklahoma (in a case brought by the State of Oklahoma) who ruled for the plaintiffs in an opinion relying mostly on the DC decision and containing virtually no independent legal analysis.
One of the first lessons law students learn is not to believe something just because a judge says it. The judges in DC who ruled for the plaintiffs based their decision largely on a mistaken assumption about the ACA.
The DC panel first held that the exchanges created by the federal government under Section 1321 were the functional equivalent of exchanges “established by the state” under Section 1311 for most purposes. This is clearly correct. They also said, however, that Section 36(B) says that subsidies are only available when the state itself actually establishes the exchange. This is the sound bite Adler and Cannon shared so often, so loudly, and in so many places. But it is not true. Here is the key passage from the DC opinion:
Sections 1311 and 1321 … to be sure, establish some degree of equivalence between state and federal Exchanges—enough, indeed, that if section 36B had authorized credits for insurance purchased on an “Exchange established under section 1311,” the IRS Rule would stand. But section 36B actually authorizes credits only for coverage purchased on an ‘Exchange established by the State under section 1311,’ and the government offers no textual basis… for concluding that a federally established Exchange is, in fact or legal fiction, established by a state.
That last sentence, the one most important to the decision, is simply false. Section 36B, as mentioned earlier does not purport to define where subsidies are available just the amount of the subsidies. It also does not say that subsidies are “only” available on state exchanges or not available at all on federal exchanges. It just doesn’t say those things. Moreover, the government offered a clear “textual basis” for concluding that a Section 1321 exchange is, in fact and law, an exchange “established by the state” for purposes of offering federal subsidies. Section 1321 directs the Secretary of HHS to create a 1311 exchange if the states don’t, and even the DC judges admitted the two types of exchanges were designed to operate the same way. But, without federal subsidies, that is simply impossible.