OKPOLICY.ORG
The ruling by Oklahoma federal District Court Judge Ronald A. White that Oklahomans buying health insurance on healthcare.gov are ineligible for tax credits may have been a victory for Attorney General Scott Pruitt. But if upheld by higher courts, it would be a huge defeat for tens of thousands of previously-uninsured Oklahomans who are using these credits to purchase affordable health coverage. The good news is that the ruling rests on a misguided interpretation of the Affordable Care Act that may still be overturned.
Premium tax credits are a central mechanism of the Affordable Care Act’s goal of extending health insurance coverage to tens of millions of uninsured Americans. Individuals and families with incomes between 100 percent and 400 percent of the poverty level are eligible for the tax credits on a sliding-scale basis. The credits can only be used to buy certain health plans on the new health insurance marketplaces, known also as Exchanges. Under the ACA, states were given the opportunity to operate their own exchange; where they chose not to do so, as in Oklahoma and a majority of states, the exchange is operated by the federal government at HealthCare.gov.
Oklahoma’s lawsuit, which mirrors ones filed in the District of Columbia (Halbig v. Burwell) and Virginia (King vs. Burwell), challenges whether individuals purchasing insurance on a federally-operated exchange are eligible for tax credits. These lawsuits rest on four words in the Affordable Care Act that tie tax credits to an exchange “established by the State” under Section 1131 of the ACA.” In his ruling, Judge White, relying heavily on the majority opinion in Halbig and on conservative legal scholars, argues that this provision unambiguously means that tax credits are available only on exchange operated by the states. He therefore struck down IRS rules that provide tax credits on federal exchange.
The weakness of Judge White’s position has been well-argued by numerous observers, including Timothy Jost (here), Ian Millhiser (here and here), Tom Goldstein (here) and Judith Solomon (here and here). There are, in fact, multiple sections of the Affordable Care Act that offer a more expansive definition of an exchange than the one relied upon by Judge White. For example, as Solomon of the Center on Budget and Policy Priorities notes:
Section 36B of the Internal Revenue Code, which section 1401 of the ACA added to the Code, specifically refers to federal exchanges in requiring all exchanges — state and federally operated — to report to the federal government on the amount of advance payments of premium credits that taxpayers receive. That provision would make no sense if people buying coverage through a federally operated exchange weren’t eligible for credits.
Other language in the Act makes it clear that the federal exchange “stands in the shoes” of the state exchange in states that opt to forgo establishing their own exchange.
These provisions should be enough to establish that the law as written is at least ambiguous as to whether credits may be offered through a federal exchange. According to Supreme Court precedent, if the law is ambiguous, a “court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency,” in this case the IRS in making the rules challenged in the state’s lawsuit. The Supreme Court has also repeatedly insisted that “the words of a statute must be read in their context and with a view to their place in the overall statutory scheme”, not in isolation. Any reasonable effort to weigh the conflicting language regarding federal exchanges within the overall law, instead of examining those four words in isolation, supports allowing tax credits on all exchange.
Currently, some 55,000 Oklahomans and 6.7 million Americans are receiving tax credits to subsidize the cost of health coverage, and that number is expected to rise during the next open enrollment period beginning in November. These low- and moderate-income people, many with chronic health conditions, are now able to access regular and timely medical care without the threat of financial catastrophe. The state’s lawsuit and Judge White’s ruling puts those Americans at risk.
The Oklahoma ruling was stayed pending a likely appeal to the 10th Circuit Court in Denver. Meanwhile, the Halbig decision, which Judge White relied on, has been vacated pending a rehearing of the case by the full D.C. Circuit Court. Ultimately, the issue is likely to be decided by the Supreme Court. The Court already upheld the law once. The question is, now that the law has been fully implemented, would the Supreme Court choose to overturn it over such a weak and questionable technicality?
