Law360, New York (November 04, 2014, 5:31 PM ET) — Eighteen state governments and the American Hospital Association on Tuesday asked the D.C. Circuit to rule that consumers shopping on federal Affordable Care Act exchanges should be allowed to reduce their premiums with tax credits, saying that to decide otherwise would be to deal an unfair blow to the ACA.
The D.C. Circuit had ruled in July to deny tax subsidies for health care exchanges that aren’t solely established by state governments, but agreed to hold a rehearing in November. In the July decision, GOP-appointed judges ruled that the ACA’s text limits the availability of subsidies by explicitly authorizing them only “through an exchange established by the state.”
The state governments and the AHA said in their Tuesday amicus briefs that this interpretation of the ACA hinges on a technicality, yet it would cause real and immediate damage to families who are trying to claim health care benefits. Most states don’t offer their own exchanges while most people who shop on health exchanges rely on tax credits, the briefs said. Denying tax credits to most of the population would lead people to avoid exchanges and undermine the ACA, they argued.
“Plaintiffs’ bid to eliminate subsidies for individuals who purchase policies through federally facilitated exchanges, if accepted, therefore would cost millions of Americans comprehensive coverage,” the AHA wrote.
The state governments, most of which rely on federal partnership to run their exchanges, also argued that disallowing the tax breaks would make the insurance markets fall apart.
“Under appellants’ interpretation of the ACA, the citizens of states that rely on a federally facilitated exchange would be denied federal premium assistance, and those states’ insurance markets would be rendered dysfunctional,” the states wrote. “There is no plausible reason to believe that Congress intended such a draconian result.”
The state governments listed on the brief include Arkansas, California, Delaware, Hawaii, Illinois, Iowa, Maine, Maryland, Mississippi, New Hampshire, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Vermont, Virginia and Washington.
Joining the AHA on its amicus petition is the Federation of American Hospitals, the Catholic Health Association, the Association of American Medical Colleges and America’s Essential Hospitals.
They all want the D.C. circuit to affirm a January decision by U.S. District Judge Paul L. Friedman, who put forward a powerful endorsement of the Obama administration’s position. Instead of finding that the administration had reasonably construed a murky statutory provision, Judge Friedman said that the ACA’s full text clearly supports federal exchange subsidies, finding it absurd to think Congress would have intentionally undermined those marketplaces by withholding assistance for consumers.
That decision looked in peril in July. The divided D.C. Circuit made a 2-1 decision along partisan lines, ruling that ACA’s text limits the availability of subsidies by explicitly authorizing them only “through an exchange established by the state.”
In three dozen states, the federal government established exchanges after state officials declined to do so, and the D.C. Circuit majority — Judges Thomas B. Griffith and A. Raymond Randolph — concluded that the language of the ACA failed to allow for tax credits in such circumstances.
The court’s decision didn’t have any immediate effect on subsidies, as it was stayed pending the outcome of a possible rehearing before the full court, which the Obama administration quickly sought. The majority’s position will likely face a tough road in the en banc review, because judges appointed by Democrats have a three-seat advantage on the D.C. Circuit.
The AHA is represented in-house by Melinda Reid Hatton, and by Dominic F. Perella and Sean Marotta of Hogan Lovells.
The Federation of American Hospitals is represented by Jeffrey G. Micklos and Kathleen Tenoever.
The Catholic Health Association of the U.S. is represented by Lisa Gilden.
The Association of Medical Colleges is represented by Ivy Baer and Frank Trinity.
America’s Essential Hospitals are represented by Barbara Eyman of Eyman Associates PC.
The states are represented by their respective attorneys general.
The federal government is represented by Stuart F. Delery, Alisa B. Klein, Mark B. Stern, Beth S. Brinkmann and Ronald C. Machen Jr. of the U.S. Department of Justice.
The appellants are represented by Michael A. Carvin, Yaakov M. Roth and Jonathan A. Berry of Jones Day.
The case is Halbig et al. v. Burwell et al., case number 14-5018, in the U.S. Court of Appeals for the District of Columbia Circuit.
–Additional reporting by Jeff Overley. Editing by Mark Lebetkin.