Amicus Curiae Brief — King v. Burwell, 135 S. Ct. 475 (2014) (No. 14-114)

Supreme Coun. US.

FILED

JAN 2 8 2015

No. 14-114 L_OFFICE OF THE CLERK _|

In the Supreme Court of the Anited States

DAVID KING, ET AL., Petitioners,

V.

SYLVIA BURWELL, SECRETARY OF HEALTH AND

HUMAN SERVICES, ET AL., Respondents.

On Writ of Certiorari To The United States

Court of Appeals For the Fourth Circuit

Brief of Amici Curiae AARP, National Health Law

Program, Services and Advocacy for Gay, Lesbian,

Bisexual and Transgender Elders, and National

Council On Aging In Support of Respondents

Urging Affirmance

Jane Perkins Stuart R. Cohen

National Health Law Counsel of Record

Program lris Y. Gonzalez

101 E. Weaver St., AARP Foundation

Suite G-7 Litigation

Carrboro, NC 27510 601 E Street, NW

(919) 968-6308 Washington, DC 20049

perkins@healthlaw.org (202) 434-2060

scohen@aarp.org

Counsel for Amici

PAGE

sy PB Fo igs) gy | era ese ise vi

cog Ls gh ERR RAR Spee aU AAR a Pe ane 1

BUREREARY OF ABU MIIEIN TE cosciscccckcccccoccsccccsccccccccccs 3

1s, ESERIES AG oper eet Oe eT OE ee ie 5

[. Before the ACA, Heath Insurance

Was Unavailable or Unaffordable

to Millions of Pre-Medicare Adults ................. 5

A. Employer-Sponsored Health

Insurance Was Frequently

Unavailable or Unaffordable ..................... 6

B. Health Insurance on the Individual

Private Market Was Unaffordable

STINE RL: Ge EE 7

C. Medicaid or Medicare Was Unavailable....9

II. Lack of Adequate and Affordable

Health Insurance Among Pre-Medicare

Adults Results in Worse Health

Outcomes and Death, and Negatively

Impacts Financial Stability, the Health

Care System, Federal Programs, and

Sie BRUNE III oo cnscccscvcceccsscccesescccscnesis 10

1

TABLE OF CONTENTS

IIT.

1

A. Uninsured Pre-Medicare Adults Die

or Suffer Worse Health Outcomes at

Greater Costs to Them and to the

BOOMs CORPO EPP OOIUI .nn cs ccevccceccsescscescccescece 10

B. When Uninsured Older Adults Enroll

In Medicare, They Become Healthier

But Are More Costly to the Medicare

C. Lack of Adequate, Affordable Health

Insurance Among Pre-Medicare

Adults Profoundly Affects Their

Financial Stability and the National

The Central and Overarching Purpose

of the ACA is to Make Health Insurance

and, Thus, Health Care Affordable to All... ..17

A. Congress Clearly Expressed the

Purpose of the ACA in Its Text................ 17

B. Congress’ Chosen Policies Were

Specifically Designed to Work

Together to Achieve the Goal of

Making Health Insurance

Accessible and Affordable to All .............. 18

1. The ACA Encourages

Employers to Offer Adequate,

Affordable Health Insurance......... 19

IV

ill

2. The ACA Encourages

Individual Participation in,

and Improves Access to, the

Individual Market..................2.......

3. The ACA Makes Health

Insurance in the Individual

Market More Affordable ................

4. The ACA Encourages States

to Expand Medicaid Coverage

for Low-Income Adults Who

May Be Exempt From the

Individual Mandate .......................

Premium Tax Credits Were Meant to

Incentivize Individuals, Not States ..............

Premium Tax Credits Are Essential to

the Act’s Primary Purpose—Achieving

Access and Affordability for All.....................

A. If Premium Tax Credits Are

Eliminated on the Federally

Facilitated Exchanges, Health

Insurance Will, Once Again,

Become Unaffordable and

Inaccessible for Millions of Low- to

Moderate-Income Americans ..................-

1. Those Who Qualify for

Premium Tax Credits Will

Find Insurance Unaffordable

and Become Uninsured .................

28

VI.

1V

2. The Effectiveness of the

Individual Mandate in

Increasing and Diversifying

the Insurance Risk Pool Wil!

Be Significantly Hampered,

Making Health Insurance

Less Affordable for Everyone

in the Private Individual

Insurance Market .......................... 30

3. Coverage Losses in Public and

Group Insurance Markets Will

Undermine the Goal of Near-

Universal Coverage ....................... 33

B. Eliminating Premium Tax Credits

on the Federally Facilitated

Exchanges Will Disproportionately

Impact Low- to Moderate-Income

Pre-Medicare Adults..................2..2....20. 100 O4

Eliminating the Availability of Premium

Tax Credits in 34 States Will Cannibalize

the Act’s Key Reforms and Jeopardize

IT Sa sh speucweddoracabnvesoseotonsee 35

A. Eliminating the Availability of

Premium Tax Credits in 34 States

Will Render Other Interconnected

ACA Reforms Meaningless .......................35

v

B. Premium Tax Credits, and the ACA,

Have Saved the Lives of Pre-

Medicare Adults Who Were

Previously Uninsured, Underinsured

or Denied Adequate, Affordable

Health Insurance Due to Their Age

or Preexisting Conditions.......................... 36

LENE kinciccctnlcsansantenumsesenemssersiemensancuaendiones 38

vi

TABLE OF AUTHORITIES

Cases

Halbig v. Sebelius, Civ. No. 13-0623 (PLF),

2014 U.S. Dist. LEXIS 4853 (D.D.C.

OE RM ea AE INR MN bh 2 Raa PER Ae nt eS te NEON 18

Nat'l Fed’n of Indep. Bus. v. Sebelius,

132 S. Ct. 2666 (2012)............ Aah se Thee! 18, 22, 23

United Steelworkers v. Weber,

Et ARS Ee DOE a MA SA 39

Statutes, Rules and Regulations

Wa ia ii ia A ese 34

Pub. L. 111-148, 124 Stat. 119 (2010).......-...00.0.000-- 18

Le ee : ) | ee 21, 23

26 U.S.C. § 36B(b)(3)(A)(i).......ceccceceeceseseecsescseceeneeees 24

26 U.S.C. § 36B(c)(2)(C) GAD)... -ceeeececececeeeeecereeees 19

I I ecresnnsnesisiconemsitnsnionsesasiomneni 24

ETE I ccnsssccieminscrivnsnitinieniniieonencibas 20

26 U.S.C. § 498OH(a) ........cecececeseecececseseseceseeeseeeeeee 19

EES I eritenscsnecrencenemtenisnnnentiocennenentt 19

vu

E506 GU a nee es 21

ihe see 24

ae (ee 21, 31

26 U.S.C. § 5OOOA(C)(2)(B)Gi) .......e.ceescescesseeceeseessesnees 22

26 U.S.C. § BO00A(c)(2)(B) (iii) .........essescecseesecsesseeneeees 22

a 6 i a 22

26 0.6.C. ¢ SOOOAGSOIOD 5k cw 22

ee I on ee a 22

26 U.S.C. § 5OOOA(])(1)(A) ........scccnscescesesecnseneees 31, 35

Pe oh CARA Ae aire ee 8

42. U.S.C. § 300gg(a)(1)(A)-(B) .......--e-sessecseesesseceeeseeees 20

42. U.S.C. § 300gg(a)(1)(A) iI) 6... eee eseceeeseeeeeees 8, 20

ETE, Sigs sens ecvitn caren ~

i i a esinsccsarenenection 20

a ie a i sineintnaneeniontnpi .

AO aia inne ntrnetenon 20

42 U.S.C. § 1394a(a)(10)(A))CVIID) .........--. eee. 22

OR na Oe EE vckstiastascidechamauscianaepetasssoneea 22

WUC FA | eee 21

8 Th Saas ee Rai 26, 27

eo hee 20

ee i 25

I ic ne 26

Oe I acai carcicoiscesibicecscecremenmienss 25

i iinnicesadiiiaciencacscesscinrnesnnienl 21, 23

CT de 0 ae ee 24

I inci iitsiescasmectcneneeacsmnsssninsiinndonei 18

LE Lod b,c ee 18

BB UII. © WII oa iisstsscisceevcasncenvnenosnssnnsonaseoes 21

Legislative Materials

H.R. Rep. No. 111-4443, vol. 1 (2010)...................... 22

ns ee CI cncnndinccsnsenntsommetotubesncentens 25

The Instability of Health Coverage in

America: Hearing Before the Subcomm.

on Health of the H. Comm. on Ways &

Means, 110th Cong. 50 (2008)......................... 12, 13

ix

Jonathan Gruber, Written Testimony of

Professor Jonathan Gruber before the

Committee on Oversight and Government

Reform, U.S. House of Representatives,

December 9, 2014, (2014),

ie IID sitcceveis contin cuntcsnecsmensescsannes

Miscellaneous

Elizabeth Abbott et al., Implementing the

Affordable Care Act’s Insurance Reforms:

Consumer Recommendations for Regulators

and Lawmakers (2012)

Linda J. Blumberg, et al., Urban Inst.,

Characteristics of Those Affected by a

Supreme Court Finding for the Plaintiff

eee PP ee eee eer eee

Se ee GIy Ge hccnieren cnctietcnascnsimeecineni 29-35

Amy Burke et al., U.S. Dep’t of Health &

Human Servs., Premium Affordability,

Competition, and Choice in the Health

Insurance Marketplace, 2014 (2014) .................

Robert Calandra, Once Opposed to ACA, Now

a Convert, Philadelphia Inquirer, Apr. 28,

2014, http://goo.glV/D48Cgt ......... oe ceeeceeeee ee eees

Michael F. Cannon, New Study Suggests

RomneyCare Saved Lives, But at a Very

High Cost, Forbes, May 5, 2014, http://

TET Sica ornndanicuinepsewsnetesienrnusmbnnveusssansenves

x

Ranee Chatterjee et al., Screening for Diabetes

and Prediabetes Should Be Cost-Saving in

Patients at High Risk, 36 Diabetes

Se I bn cencniisxsutvasisdiadadonincnsvevmeivesesennbeude 13

Sara R. Collins et al., The Commonwealth

Fund, Help on the Horizon: How the

Recession Has Left Millions of Workers

Without Health Insurance, and How

Health Reform Will Bring Relief

SUIIINET Ul scnceisiinh ccs cinmatemiaetasheddcadbeaanainiashsiapeaseresdeumamiia 14, 15

Sara R. Collins et al., The Commonwealth

Fund, Realizing Health Reform’s Potential:

Adults Ages 50-64 and the Affordable Care

RE er ee I wivcaccsdnsdsaccteancctnsecanaceenssncnss 6, 7, 14

Ctrs. for Medicare & Medicaid Servs., Medicare

& Medicaid Statistical Supplement: 2013

Edition (2012), http://goo.g/gYdWFW .................... 9

Cong. Budget Office, Insurance Coverage

Provisions of the Affordable Care Act—

CBO’s January 2015 Baseline (2015).............. 23, 30

Cong. Budget Office, Labor Market Effects

of the Affordable Care Act: Updated

Estimates, in The Budget and Economic

Outlook: 2014 to 2024 (2014).......................00.. 14, 15

Cong. Budget Office, Updated Estimates of

the Effects of the Insurance Coverage

Provisions of the Affordable Care Act,

Pe I cciadeisrvinenipiesbinineniaeciapenesinl 28, 29

xl

Keziah Cook et al., Does Major Illness Cause

Financial Catastrophe? 45 Health Servs.

I aa ae 15

Cynthia Cox et al., Kaiser Family Found., An

Early Look at Premiums and Insurer

Participation in Health Insurance

POC, DIES GAG wv evcis veccsccievessisesssscccscntacca 34

Sid Groememan, AARP, Staying Ahead of the

Curve 2007: The AARP Work and Career

Study (2008)

Jonathan Gruber at Noblis, Jan. 18, 2012,

I IN Weis sv vesiinccdcreccsnessoiiscacdeveeninvexscensl 27

Inst. of Med., America’s Uninsured Crisis:

Consequences for Health and Health Care

II cco ccstntenrsepdsnciaseupiaviaebactctvadeseortecsels 11, 12

Richard W. Johnson et al., AARP Pub. Policy

Inst., Older Workers on the Move:

Recareering in Later Life (2009).....................0.00-0 14

Timothy S. Jost, Health Insurance Exchanges:

NS MN, Cite tictsesnsccnnscsienrenvcicespixssandivatisiens 26

Kaiser Comm’‘n on Medicaid & the Uninsured,

Key Facts about the Uninsured Population

ae denicsrneete cacshus'enseadcentiansteubetiuasadisncedinbasoaiennienes 6

Kaiser Family Found., Health Insurance

Market Reforms: Guaranteed Issue (2012),

NN I i 6 oisciiicvncnnantasbasicndeet cansidaientéawpneanns 8

x11

Kaiser Family Found., Marketplace Enrollees

Eligible for Financial Assistance as a Share

of the Subsidy Eligible Population (Apr. 19,

2014), http://eo00.gVBO4iAZ ..............00..0..c0c.c.00.0000. 30

Kaiser Family Found., State Decisions on

Health Insurance Marketplaces and the

Medicaid Expansion (Jan. 27, 2015),

noose cantekucoeianielis 5, 23, 36

Noam N. Levey, Obamacare’s Guaranteed

Health Coverage Changes Lives in First

Year, LA Times, Jan. 4, 2015,

SET SO ROCA ar at nee EPO 37

Larry Levitt & Gary Claxton, Kaiser Family

Found., The Potential Side Effects of Halbig

(Jul. 31, 2014), http://goo.g/GECcHt .............. 32, 33

J. Michael McWilliams et al., Use of Health

Services by Previously Uninsured

Medicare Beneficiaries, 357 New Eng. J.

RS, Cee Sesadia tartare Stats rtecals AOE -EMe Poem ae AS 12

Megan Multack, AARP Pub. Policy Inst., Use

of Clinical Preventive Services and

Prevalence of Health Risk Factors Among

Adults Aged 50-64 (2013)............... BARN.) a ETERS 11

Nat'l Colorectal Cancer Roundtable, /ncreasing

Colorectal Cancer Screening ~— Saving

Lives and Saving Dollars: Screening 50 to

64 Year-Olds Reduces Cancer Costs to

Medicare (2007)............ ee ea ee a 13

x1ll

Lynn Nonnemaker, AARP Pub. Policy Inst.,

Beyond Age Rating: Spreading Risk in

Health Insurance Markets (2009)

Karen Pollitz et al., Kaiser Family Found.,

Medical Debt Among People With Health

Insurance (2014)

Sara E. Rix, AARP Pub. Policy Inst., The

Employment Situation, December 2013:

Disappointing Year-End Numbers for

Older Workers (2014)

Evan Saltzman & Christine Eibner, Rand

Corp., The Effect of Eliminating the

Affordable Care Act’s Tax Credits in

Federally Facilitated Marketplaces (2015)

Jeannine S. Schiller et al., U.S. Dep't of

Health & Human Servs., Summary

Health Statistics for U.S. Adults:

National Health Inter: 2w Survey,

2010 (2012)

Press Release, Sentier Research, Household

Income Down by 3.1 Percent Overall

Post Recession, But Many Groups Have

Started to Recover Following 2011 Low-

Point (2014)

Gerry Smolka et al., AARP Pub. Policy

Inst., Effect of Health Reform for

50-to 64-Year-Olds (2013)

PR - oo eee ee 2

ILO oe eee eee eee eee eee eee eee eee ee ee ee eee eee eee

OL eee eee eee eee eee eee eee eee ee eee ee ee eee eee eee ee |

sh medhiohnatod 5, 6, 9, 19, 22, 23

X1V

Gerry Smolka et al., AARP Pub. Policy Inst.,

Health Care Reform: What’s at Stake for

50- to 64- Year Olds? (2009) .....................00.. 5. 15, 20

Kevin T. Stroupe et al., Chronic Illness and

Health Insurance-Related Job Lock, 20 J.

Policy Analysis & Mgmt. 525 (2000)...............0..... 14

U.S. Dep’t of Commerce, Census Bureau,

Income, Poverty and Health Insurance

Coverage in the United States: 2012 (2013).......... 16

U.S. Dep’t of Commerce, Census Bureau,

Living in Near Poverty in the United

a en cleswunennaneblameumnusnee 16

U.S. Dep't of Health & Human Servs., At

Risk: Pre-Existing Health Conditions

Could Affect 1 in 2 Americans (2011)...................... 8

U.S. Dep’t of Health & Human Servs., Ctrs.

for Disease Control & Prevention, Chronic

Diseases: The Power to Prevent, the Call to

REE AAS Sen CE CARLENE el UU Se 10, 11

U.S. Dep’t of Health & Human Servs., Office

of the Assistant Sec. for Planning and

Evaluation, Further Resources on Poverty

Measures, Poverty Lines, and Their

Friatery, REC ITROO.G TE BMRA... .ncsccecccscccccccessccesis 15

XV

U.S. Dep’t of Health & Human Servs.,

Health Insurance Marketplace 2015 Open

Enrollment Period: January Enrollment

Report For the Period: November 15, 2014 -

January 16, 2015 (2015).................secscscs00 29, 31, 34

U.S. Dep’t of Health & Human Servs., Health

Insurance Marketplace: Summary

Enrollment Report for the Initial Annual

Open Enrollment Period: October 1, 2013 -

Pp Bk Re eee 28, 34

U.S. Gov't Accountability Office, GAO-15-53,

Medicare: Continuous Insurance Before

Enrollment Associated With Better Health

and Lower Program Spending (2013) ................... 12

Brian W. Ward & Jeannine S. Schiller,

Prevalence of Multiple Chronic Conditions

Among US Adults: Estimates From the

National Health Interview Survey, 10

Preventing Chronic Disease 1 (2013)

Dale H. Yamamoto, Soc’y of Actuaries,

Health Care Costs from Birth to Death

(2013)

INTERESTS OF AMICP

AARP is a nonprofit, nonpartisan organization

with a membership that strengthens communities

and fights for the issues that matter most to families

such as health care, employment, income security,

retirement planning, affordable’ utilities and

protection from financial abuse. Since its founding in

1958, AARP has advocated for quality, affordable,

and accessible health care as well as controlled

health care costs. In response to the growing number

of older people who lacked health care services or

faced financial burdens due to unaffordable and

inaccessible insurance and other health care costs,

AARP sought legislative reforms that would, among

other objectives: guarantee access to affordable

health insurance for people ages 50 to 64 who were

priced out of the individual market due to their age,

preexisting conditions, or health status; and help

low- to moderate-income older adults receive

assistance with premiums and other health care

costs.

The National Health Law Program (NHeLP)

protects and advances the health nghts of low-

income and underserved people. For over forty years,

NHeLP has worked to help individuals and advocates

1 Counsel for the parties filed notices of consent to the filing of

amicus curiae briefs in this case. No counsel for any party

authored this brief in whole or in part. No person or entity

aside from amici or its counsel made a monetary contribution to

support the preparation or submission of this brief.

2

overcome barriers to health care, including lack of

affordable services.

Services & Advocacy for GLBT Elders (SAGE)

is the largest and oldest national organization

dedicated to improving the lives of lesbian, gay,

bisexual and transgender (LGBT) older adults.

Founded in 1978, SAGE coordinates a network of

affiliates across the country, offers supportive

services and consumer resources for LGBT older

adults and their caregivers, advocates for public

policy changes that address the needs of LGBT older

people, and provides training for aging providers and

LGBT organizations. Many LGBT older adults

across the country struggle to find affordable and

culturally competent health care—placing them at a

significant disadvantage when they are most

vulnerable. SAGE is committed to ensuring that the

Patient Protection and Affordable Care Act (ACA or

“the Act”) protects the ability of all older adults to

age with security and dignity.

For 65 years, the National Council on Aging

(NCOA) has been a respected national leader and

trusted partner to help people aged 60+ meet the

challenges of aging. Our mission is to improve the

lives of millions of older adults, especially those who

are struggling. Through innovative community

programs and services, online help, and advocacy,

NCOA is partnering with nonprofit organizations,

government, and business to improve the health and

economic security of 10 million older adults by 2020.

NCOA’s Center for Benefits Access helps community-

based organizations find and enroll seniors and

3

younger adults with disabilities with limited means

into benefits programs for which they are eligible, so

they can remain healthy, secure, and independent.

Amici have supported the ACA and the access

to affordable health insurance it provides for millions

of individuals. Premium tax credits under the ACA

are critical to affordability and, thus, access to

needed health care services. Amici are interested in

the issues raised by this case, and write to provide

additional information about how the Act’s statutory

provisions work together to achieve its overarching

purpose and how the Petitioners’ theory of statutory

construction squarely contravenes that purpose and

harms vulnerable people—in particular older adults.

The Parties and other amici have not addressed the

impact of premium tax credit assistance on older

adults’ ability to obtain adequate and affordable

health insurance and on their lives.

SUMMARY OF ARGUMENT

The overarching purpose of the ACA is to

address the lack of adequate and affordable health

insurance and, thus, access to health care—a

complex social and economic problem that affects all,

but can be especially challenging to those ages 50 to

64 (hereinafter “pre-Medicare adults”). Pre-Medicare

adults faced special difficulties in obtaining adequate

and affordable health insurance in the nongroup and

employer-based markets and generally did not

qualify for publicly funded insurance.

4

Prior to the passage of the ACA, pre-Medicare

adults were denied coverage based on preexisting

conditions or health status or offered costly policies

that excluded coverage for needed care. When

coverage was available, insurance premiums for older

adults were up to seven times higher than those for

younger adults. Annual and lifetime caps—easily

exceeded by treatment for a single illness such as

cancer or heart disease—meant that many older

adults either went without treatment until they

became eligible for Medicare or incurred financially

ruinous medical debt. Lack of adequate insurance

among this pre-Medicare group resulted in worse

health outcomes, including death, and negatively

impacted personal finances, health care spending,

federal programs, and the national economy.

The ACA reflects Congress’ chosen policies to

address these _ problems. Reflecting a _ basic

understanding that affordability and accessibility of

health insurance in the private individual market

required a larger and more diversified insurance risk

pool, key reform provisions of the ACA are designed

to encourage people to obtain health insurance and to

reduce barriers to coverage. Among __ these

interconnected reforms is the availability cf federal

tax credits to reduce premiums for indiviauals who

buy insurance on the Exchanges.

Petitioners’ argument that Congress intended

to provide premium tax credits only to individuals in

states that established an Exchange is inconsistent

5

with the text and structure of the Act? and is directly

at odds with its purpose, as expressed by Congress

and manifested in its interconnected reforms.

Petitioners’ acontextual interpretation of a single

phrase in one provision of the Act—if accepted—will

make insurance unaffordable in the 34 states that

use the Federally Facilitated Exchanges,* harming

low- to moderate-income residents of those states. It

would also render meaningless other key provisions

of the ACA designed to increase access to affordable

health insurance for all.

ARGUMENT

I. Before the ACA, Health Insurance Was

Unavailable or Unaffordable to Millions

of Pre-Medicare Adults.

Before implementation of the ACA, the

number of uninsured Americans aged 50 to 64, grew

at an alarming rate—increasing from 5.2 million in

2000, to 7.1 million in 2007, and then to 9.2 million

in 2012. See Gerry Smolka et al., AARP Pub. Policy

Inst., Health Care Reform: What’s at Stake for 50- to

64-Year Olds? 1 (2009) [What’s at Stake]; Gerry

2 Amici adopt and incorporate by reference Respondents’

arguments regarding statutory construction of the ACA.

% Individuals may purchase health insurance policies via 27

Federally Facilitated Marketplaces and 7 State-Partnership

Marketplaces. See Kaiser Family Found., State Decisions on

Health Insurance Marketplaces and the Medicaid Expansion

(Jan. 27, 2015), http://goo.g/NmpIrG (last visited Jan. 28, 2015)

[State Decisions]. Amici refer to these 34 Marketplaces

collectively as “Federally Facilitated Exchanges.

6

Smolka et al., AARP Pub. Policy Inst., Effect of

Health Reform for 50-to 64-Year-Olds 1 (2013) [Effect

of Health Reform]. Most uninsured pre-Medicare

adults did not have access to affordable employer-

sponsored insurance, could not afford private

insurance on the individual market, or did not

qualify for publicly funded insurance programs. See

Kaiser Comm'n on Medicaid & the Uninsured, Key

Facts about the Uninsured Population 2 (2013). The

consequences for these individuals, their families,

and the nation were devastating.

A. Employer-Sponsored Health Insurance

Was Frequently Unavailable or

Unaffordable.

For many pre-Medicare adults, employer-

sponsored insurance was unavailable or

unaffordable. In 2012, an estimated 11 million

employed pre-Medicare adults did not have employer-

sponsored insurance. Effect of Health Reform, supra,

2. Of these, less than half were able to obtain

coverage from another source. Jd. The unavailability

of employer-sponsored insurance for pre-Medicare

adults was driven, in part, by the economic recession,

during which this group experienced rising rates of

unemployment. See Sara R. Collins et al., The

Commonwealth Fund, Realizing Health Reform’s

Potential: Adults Ages 50-64 and the Affordable Care

Act of 2010, at 2 (2010) [Realizing Health Reform's

Potential]. Pre-Medicare adults went without

employer-sponsored insurance for longer than their

younger counterparts because, on average, they

remained unemployed for longer periods of time. 7d.

7

As of December 2013, for example, adults ages 55

and older remained unemployed for an average of

11.6 weeks longer than their younger counterparts.

See Sara E. Rix, AARP Pub. Policy Inst., The

Employment Situation, December 2013:

Disappointing Year-End Numbers for Older Workers

4 (2014).

B. Health Insurance on the Individual

Private Market Was Unaffordable or

Inadequate.

Prior to ACA reforms, many pre-Medicare

adults could not afford adequate insurance policies

on the private individual market. In 2007, 61% of

pre-Medicare adults who tried to purchase health

insurance on the _ private market found it

unaffordable. See Realizing Health Reform’s

Potential, supra, 5 ex. 4. Among those who

purchased insurance, 60% reported difficulty paying

medical bills or accessing services due to cost such

that they were effectively underinsured. /d. 6 ex. 5.

High health insurance premiums, high out-of-pocket

medical expenses, and lack of coverage for older

adults were linked to insurance underwriting policies

that allowed insurers to deny coverage or charge

higher premiums based on age and/or health status,

offer very limited policies to people with preexisting

conditions, or offer policies with comprehensive

coverage but prohibitively expensive premiums

and/or cost sharing. See Elizabeth Abbott et al.,

Implementing the Affordable Care Act’s Insurance

Reforms: Consumer Recommendations for Regulators

and Lawmakers 10-13 (2012); Lynn Nonnemaker,

8

AARP Pub. Policy Inst., Beyond Age Rating:

Spreading Risk in Health Insurance Markets 2-3

(2009) [Beyond Age Rating}. Pre-Medicare adults

were disproportionately affected by these

underwriting policies because 48 to 86% of people

ages 55 to 64 had preexisting health conditions. U.S.

Dep’t of Health & Human Servs., At Risk. Pre-

Existing Health Conditions Could Affect I in 2

Americans 3 fig. 1 (2011).

ACA reforms prohibit or limit these practices.

See, e.g., 42 U.S.C. § 300gg(a) (2012) (premiums may

not be based on health status); 42 U.S.C.

§ 300gg-1 (2012) (guaranteed issue in individual and

group markets); 42 U.S.C. § 300gg-2 (2012)

(guaranteed renewal). These reforms prohibit

insurance companies from denying coverage based on

preexisting conditions, disability, or other

information related to health status such as genetic

predispositions or past medical expenses. See Kaiser

Family Found., Health Insurance Market Reforms:

Guaranteed Issue (2012), http://goo.gl/9d4Sk7. Yet,

even after the passage of the ACA, challenges remain

for pre-Medicare adults shopping for health

insurance in the private market because they still

face higher premiums than their younger

counterparts. See 42 U.S.C. § 300gg(a)(1)(A)(iii)

(permitting age rating ratio of 3:1). As a group,

however, they are no better able to afford higher

premiums than other age groups. An analysis of the

March 2008 Current Population Survey revealed that

the median income for the uninsured ages 50 to 64

was roughly equal to the median income of their

younger counterparts. Beyond Age Rating, supra, 3

9

tbl. 1. Moreover, the Great Recession worsened the

financial outlook for households led by people

between ages 55 and 64, whose median household

income declined by 6.4%—the largest percentage

decrease among all age groups. See Press Release,

Sentier Research, Household Income Down by 3.1

Percent Overall Post Recession, But Many Groups

Have Started to Recover Following 2011 Low-Point 1

(2014), http://goo.g/cU2BSf. Federal assistance with

insurance plan premiums and out-of-pocket costs is,

therefore, critical to insurance affordability and

access for pre-Medicare adults.

C. Medicaid or Medicare Was

Unavailable.

Most adults ages 50 to 64 did not qualify for

publicly funded insurance. In 2012, 10% of the

insured ages 50 to 64 had coverage through Medicaid

and 8% had some other form of public insurance such

as Medicare,4 VA, or TRICARE—representing only

13% of the total population in this age range. Effect

of Health Reform, supra, 1-2, 5. Even if all states

now expanded Medicaid eligibility to include adults

who have incomes at or below 138% of poverty, less

than one third of the 13.8 million pre-Medicare

adults who were on the individual health insurance

market or uninsured in 2012 would be eligible for

Medicaid. Id. 7-8 fig. 2.

4 In 2012, only 17% of Medicare beneficiaries were under the

age of 65 because they qualified due to disability rather than

age. See Ctrs. for Medicare & Medicaid Servs., Medicare &

Medicaid Statistical Supplement: 2013 Edition tbl. 2.4 (2012),

http://goo. g/gYdWFW.

10

Il. Lack of Adequate and Affordable Health

Insurance Among Pre-Medicare Adults

Results in Worse Health Outcomes and

Death, and Negatively Impacts Financial

Stability, the Health Care System,

Federal Programs, and the National

Economy.

A. Uninsured Pre-Medicare Adults Die or

Suffer Worse Health Outcomes at

Greater Costs to Them and to the

Health Care System.

As people age, they are more likely to

experience chronic health conditions, resulting in

worse health outcomes and increased mortality for

the uninsured. The prevalence of multiple chronic

conditions is greater in adults ages 45 to 64 than in

younger adults and, for this older population, it

increased significantly between 2001 and 2010.

Brian W. Ward & Jeannine S. Schiller, Prevalence of

Multiple Chronic Conditions Among US Adults:

Estimates From the National Health Interview

Survey, 2010, 10 Preventing Chronic Disease 1, 5

(2013). For example, adults ages 45 to 64 suffer from

heart disease at a rate three times higher than

younger adults. Jeannine S. Schiller et al., U-S.

Dep't of Health & Human Servs., Summary Health

Statistics for U.S. Adults: National Health Interview

Survey, 2010, at 19 (2012). The Centers for Disease

Control and Prevention estimates that chronic

conditions are the leading cause of death and

disability and that treating such conditions accounts

for more than 75% of health care spending. U.S.

11

Dep’t of Health & Human Servs., Ctrs. for Disease

Control & Prevention, Chronic Diseases: The Power

to Prevent, the Call to Control 2 (2009). This

tremendous toll on human life and on health care

resources can be reduced, as many of these conditions

are preventable and can be effectively controlled with

preventive services and early treatment. The

uninsured, however, are less likely to have access to

these services. Id.

Uninsured pre-Medicare adults are three

times less likely to be up-to-date with clinical

preventive services than those who are insured. See

Megan Multack, AARP Pub. Policy Inst., Use of

Clinical Preventive Services and Prevalence of Health

Risk Factors Among Adults Aged 50-64, at 40, 43

(2013) (32.8% of insured women were up-to-date,

compared to only 10% of uninsured women; 36.1% of

insured men were up-to-date, compared to only 12.4%

of uninsured men). Uninsured adults are less likely

to be aware of risk factors for chronic conditions and

to have these conditions diagnosed, treated, or well-

controlled. Inst. of Med., America’s Uninsured Crisis:

Consequences for Health and Health Care, 72-83

(2009) (comparing uninsured adults ages 18 to 64 to

their insured counterparts). Consequently,

uninsured adults suffer worse health outcomes,

including higher mortality rates. /d. at 75 tbl. 3-4.

12

B. When Uninsured Older Adults Enroll

In Medicare, They Become Healthier

But Are More Costly to the Medicare

System.

When previously uninsured older adults gain

Medicare coverage, they experience improved health

outcomes and a decreased risk of dying when

hospitalized for serious conditions. Jd. at 72. These

findings suggest that uninsured pre-Medicare adults

had significant unmet health needs before they

enrolled in Medicare and gained increased access to

prescription drugs and other medical treatments to

control their illnesses. See id. at 77. Consequently,

it is substantially more costly to treat the previously

uninsured in the Medicare system than treating

those who were previously insured. See U.S. Gov't

Accountability Office, GAO- 15-53, Medicare:

Continuous Insurance Before Enrollment Associated

with Better Health and Lower Program Spending 9

(2013) (Medicare spent 35% more on the previously

uninsured in the first year of enrollment than on

those continuously insured over the previous six

years); see also J. Michael McWilliams et al., Use of

Health Services by Previously Uninsured Medicare

Beneficiaries, 357 New Eng. J. Med. 143, 151 (2007).

Obtaining preventive services and medical

treatments earlier could reduce the cost of medical

and drug treatments for individuals who eventually

enroll in Medicare because conditions would be

diagnosed at less advanced stages and/or better

controlled. See The Instability of Health Coverage in

America: Hearing Before the Subcomm. on Health of

13

the H. Comm. on Ways & Means, 110th Cong. 50

(2008) (statement of Dr. John Z. Ayanian). For

example, one study followed adults ages 50 to 64

until they reached the age of 75 and found that, if

they received screening for colorectal cancer before

enrolling in Medicare, the program could save

between $7.7 and $21.7 billion in potential treatment

costs. See Nat'l Colorectal Cancer Roundtable,

Increasing Colorectal Cancer Screening -— Saving

Lives and Saving Dollars: Screening 50 to 64 Year-

Olds Reduces Cancer Costs to Medicare 2 (2007).

Similarly, diabetes screening for people who are 55

and older and have at least one risk factor could

reduce Medicare's diabetes-related costs of care by

17.1%. Ranee Chatterjee et al., Screening for

Diabetes and Prediabetes Should Be Cost-Saving in

Patients at High Risk, 36 Diabetes Care 1981, 1984

tb]. 2 (2013). For uninsured pre-Medicare adults,

however, these types of preventive and screening

services and treatment for underlying conditions, are

unaffordable and inaccessible.

C. Lack of Adequate, Affordable Health

Insurance Among Pre-Medicare Adults

Profoundly Affects Their Financial

Stability and the National Economy.

The lack of adequate, affordable health

insurance profoundly affects both the financial

mobility and stability of pre-Medicare adults and, in

turn, the national economy. Many pre-Medicare

workers who relied on employer-sponsored health

insurance did not leave their jobs, switch jobs, reduce

their hours, or retire for fear that they would lose

14

and be unable to regain affordable health benefits.

See Richard W. Johnson et al., AARP Pub. Policy

Inst., Older Workers on the Move: Recareering in

Later Life at x, 10, 18 (2009) (“Nearly a quarter of

career changers lose health insurance when they

change jobs; only about 10 percent gain insurance.”);

see also Sara R. Collins et al., The Commonwealth

Fund, Help on the Horizon: How the Recession Has

Left Millions of Workers Without Health Insurance,

and How Health Reform Will Bring Relief 3 (2011)

[Help on the Horizon] (nearly three fifths of adults 18

to 64 who lost employer health benefits became

uninsured). Chronically ill workers, who are more

likely to be older workers, were 40% less likely to

leave their jobs if they had employer-sponsored

health insurance compared to those who did not rely

on such coverage. Kevin T. Stroupe et al., Chronic

Illness and Health Insurance-Related Job Lock, 20 J.

Policy Analysis & Mgmt. 525, 525 (2000). Many

older workers eligible for Medicare needed to

maintain health coverage for a younger spouse or

dependent child and were deterred from retiring or

reducing their work hours. See Sid Groememan,

AARP, Staying Ahead of the Curve 2007: The AARP

Work and Career Study 23 (2008) (finding that 47%

of workers 62 to 74 cited the “need to maintain

health insurance” as a reason to continue working).

The Congressional Budget Office (CBO) projected a

decrease in the number of work hours inversely

related to the availability of subsidies on the

Exchanges, suggesting that the availability of

affordable health insurance will increase labor

market mobility. See Cong. Budget Office, Labor

Market Effects of the Affordable Care Act: Updated

15

Estimates, in The Budget and Economic Outlook:

2014 to 2024 at 121 (2014).

Health care costs were financially debilitating

for those with inadequate or no health insurance.

See, e.g., Karen Pollitz et al., Kaiser Family Found.,

Medical Debt Among People with Health Insurance

12, 19 (2014) (profiling a 5l-year-old man with

household income below 400% of Federal Poverty

Level (FPL)5 and high insurance premiums that

contributed to his bankruptcy). The median pre-

Medicare household with a recently ill and uninsured

member lost between 30 and 50% of its assets.

Keziah Cook et al., Does Major Illness Cause

Financial Catastrophe? 45 Health Servs. Res. 418,

419 (2010). More than two thirds of pre-Medicare

adults who participated in the individual insurance

market paid more than 10% of their income to

medical costs. What’s at Stake, supra, 2 tbl. 1. One

study estimated that 29 million people used all of

their savings on medical expenses. Help on the

Horizon, supra, 12. Another 22 million were unable

to pay for basic necessities such as rent, food, and

utilities due to medical bills. Jd.

These health-care-related financial burdens

severely hampered’ retirement security for

individuals and hurt the national economy as well.

5 The Federal Poverty Level is set by guidelines based on

poverty thresholds and used to determine eligibility for certain

federal programs. U.S. Dep’t of Health & Human Servs., Office

of the Assistant Sec. for Planning and Evaluation, Further

Resources on Poverty Measures, Poverty Lines, and Their

History, http://goo.gl/Y Yn¢xA (last visited Jan. 28, 2015).

16

In 2012, there were 6.3 million adults ages 65 and

older living at or near the FPL. See U.S. Dep't of

Commerce, U.S. Census Bureau, Income, Poverty and

Health Insurance Coverage in the United States:

2012, at 14 (2013) [Poverty] (3.9 million living at or

below the FPL); U.S. Dep’t of Commerce, U.S. Census

Bureau, Living in Near Poverty in the United States:

1966-2012, at 19 (2014) [Near Poverty] (2.4 million

living between 100% and 125% of the FPL). The

number of older adults living in financial insecurity

is likely higher because the factors considered to

calculate the FPL, developed 40 years ago, do not

take into account a number of relevant measures of

economic wellbeing such as health care costs, which

increase as one ages. See Poverty, supra, 20-21

(finding that15.3 million additional people over 65

would be in poverty if social security payments were

not counted as income); Dale H. Yamamoto, Soc’y of

Actuaries, Health Care Costs From Birth to Death i

(2013) (finding that health care costs increase with

age). National budget deficits are worsened when

lower-income pre-Medicare adults use a large share

of their income on rising health care expenses, retire

without savings, and find they must turn to

government assistance to meet housing, food, and

utility needs. See Near Poverty, supra, 15 fig. 9

(detailing the rates at which people in and near

poverty received public assistance in 2012).

17

II. The Central and Overarching Purpose of

the ACA is to Make Health Insurance and,

Thus, Health Care Affordable to All.

The central and overarching purpose of the

ACA was to address the complex problems described

above by making health insurance and, thus, health

care accessible and affordable to all. Congress clearly

expressed this purpose in the text of the Act.

Moreover, Congress made policy choices in the Act

that were clearly intended to effectuate this purpose

and thereby reduce the staggering burdens of lack of

affordable insurance on the uninsured, the health

care system, federal spending programs, and the

national economy. Congress understood that health

insurance affordability could only be achieved by

significantly expanding and_ diversifying’ the

population of insured individuals. Thus, many key

provisions of the ACA, including those that authorize

premium tax credits, are designed to encourage more

Americans of varying health statuses to obtain

health insurance. Petitioners acontextual

interpretation of a single phrase in one provision of

the Act, which is only used to calculate the amount of

the premium tax credit, by contrast, would have the

opposite effect: discouraging participation in the

insurance marketplace and raising costs.

A. Congress Clearly Expressed the

Purpose of the ACA in Its Text.

The purpose of the ACA, as expressed by

Congress in its text, is to achieve “near-universal

coverage” and “lower health insurance premiums.”

18

42 U.S.C. § 18091(2)(D), (1) (2012); see also Nat’

Fed’n of Indep. Bus. v. Sebelius, 132 S. Ct. 2566, 2580

(2012) (purpose of the Act is “to increase the number

of Americans covered by health insurance and

decrease the cost of health care”). The name of the

Act—the “Patient Protection and Affordable Care

Act”—reflects the purpose of the legislation, as do the

names of the Titles of the ACA. See Pub. L. 111-148,

§ 1, 124 Stat. 119, 119 (2010). As one District Court

noted, “Title 1 of the ACA is titled ‘Quality,

Affordable Health Care for All Americans.” Halbig

v. Sebelius, Civ. No. 13-0623 (PLF), 2014 U.S. Dist.

LEXIS 4853, at *55 (D.D.C. Jan. 15, 2014).

B. Congress’ Chosen Policies Were

Specifically Designed to Work

Together to Achieve the Goal of

Making Health Insurance Accessible

and Affordable to All.

Congress chose to accomplish “near universal

coverage” and “lower health insurance premiums’

through a series of statutory requirements that,

working together, make coverage affordable and

accessible to everyone. See 42 U.S.C. § 18091(2)

(2012). The ACA reduces the number of uninsured

by establishing incentives for individuals, states, and

employers to participate in the insurance markets

and provide insurance coverage. The Act also

increases access to health insurance in the individual

market through guaranteed issue provisions, rating

limitations, and the individual mandate. Together,

these provisions improve affordability because they

ensure that the insurance risk pool is larger and

19

more diverse, and, in doing so, keep premiums down.

Finally, the ACA makes insurance more affordable

for low- to moderate-income individuals through tax

credits to lower the cost of premiums and cost-

sharing reductions to assist with out-of-pocket costs.

1. The ACA Encourages Employers to

Offer Adequate, Affordable Health

Insurance.

Employer-based insurance is the traditional

backbone of the American health insurance system

where most adults purchase coverage. Yet, in 2012,

10.8 million older workers did not have access to

employer-based insurance, and 5.9 million of those

workers were not able to obtain coverage from

another source. Effect of Health Reform, supra, 3 tbl.

2. The ACA addresses this problem by encouraging

employers to offer health insurance. The Act imposes

a shared-responsibility requirement on large

employers, who now face a tax penalty if they do not

offer adequate and affordable insurance to their full-

time employees. See 26 U.S.C. § 4980H(a) (2012)

(penalizing large employers who do not offer

affordable minimum coverage to employees); 26

U.S.C. § 36B(c)2)(C)G@dID (2012) (employer-

sponsored coverage is unaffordable if the employee's

share of the premium for self-only coverage is more

than 9.5 percent of his or her household income); 26

U.S.C. § 4980H(b)-(d) (2012) (employer is penalized

after verification that it did not offer insurance that

meets the defined affordability and adequacy

standards). Small employers are also encouraged to

provide health benefits to their employees through

20

the Small Business Health Options Program, which

is designed to increase their buying power on the

group market by making tax credits available. See

42 U.S.C. § 18031(b)(1)(B) (2012); 26 U.S.C. § 45R

(2012) (small businesses are eligible for tax credits

for health insurance expenses when low-wage

workers buy health insurance through the Program).

2. The ACA Encourages Individual

Participation in, and Improves

Access to, the Individual Market.

For those without employer-sponsored

insurance, the ACA eliminates or significantly

reduces the barriers that many pre-Medicare adults

previously faced in accessing affordable health

insurance in the individual market. See, supra, Part

I.B.; What’s at Stake, supra, 5. The Act bans

insurers’ practice of cancelling the policies of people

who became ill and requires insurers to “accept every

employer and individual in the State that applies for

coverage,” regardless of preexisting conditions.

42 U.S.C. § 300gg-1(a); accord 42 U.S.C. § 300gg—12

(2012). New rating limitations prohibit insurers from

charging differential premiums based on health

status. 42 U.S.C. § 300gg(a)(1)(A)-(B) (2012).

Though insurers may still use age-rating, premiums

for older adults may not be more than three times the

amount of the premium for a younger adult. 42

U.S.C. § 300gg(a)(1)(A) Gus) (2012).

To ensure that the insurance market can cover

the risk of insuring more people with health

conditions, the individual mandate ensures that

21

healthy people participate by requiring most people

to purchase insurance and maintain minimum health

coverage. 26 U.S.C. § 5000A(a) (2012). Between

guaranteed issue provisions, rating limitations, and

the individual mandate, the ACA seeks to create

“effective health insurance markets in which

improved health insurance products can be sold”

by broadening the risk pool to include people of

varying health statuses. 42 U.S.C. § 18091(2)(I)

(2012).

3. The ACA Makes Health Insurance

in the Individual Market More

Affordable.

In addition to reducing barriers to access, the

ACA makes health insurance on the individual

market more affordable through two principal forms

of direct financial assistance to qualified individuals

buying coverage offered on the Health Insurance

Exchange/Marketplace: tax credits to reduce

premium costs for people with incomes between 100

and 400% of the FPL, 26 U.S.C. § 36B(b)(3)(A), and

cost-sharing reductions for out-of-pocket expenses for

people with incomes below 250% of the FPL, 42

U.S.C. § 18071(c)(2). These forms of assistance were

designed to encourage low- to moderate-income

adults to purchase insurance rather than seek the

unaffordability exemption or pay the_ shared

6 Adults 30 years of age and under and those who demonstrate

they cannot afford coverage have the option to purchase

catastrophic coverage, and everyone has the option of paying a

tax in lieu of purchasing coverage. See 42 U.S.C. § 18022(e)

(2012); 26 U.S.C. § 5000A(c) (2012).

22

responsibility tax.?7 H.R. Rep. No. 111-443, vol. 1, at

250 (2010) (premium tax credits “are key to ensuring

people affordable health coverage”). In 2012, about 2

million people ages 50 to 64 that were in the

individual market and more than 5 million who were

uninsured could qualify for premium tax credits for

individual coverage purchased on the Exchange.

Effect of Health Reform, supra, 7.

4. The ACA Encourages States to

Expand Medicaid Coverage for

Low-Income Adults Who May Be

Exempt From the Individual

Mandate.

While individuals who cannot afford coverage

even with the aid of premium tax credits are exempt

from the individual mandate, 26 U.S.C.

§ 5000A(e)(1), states may expand their Medicaid

programs so that lower income people are eligible for

public insurance under the ACA. 42 U.S.C.

§1396a(a)(10)(A) (i)(VIII) (2012). Prior to the ACA,

low-income adults without dependent children were

not eligible for Medicaid in most states unless they

had a disability. Beginning in 2014, adults in this

category whose incomes are at or below 138% of

federal poverty will be eligible for Medicaid if their

state chose to participate in this expansion. 42

U.S.C. § 1396d(y) (2012); Nat'l Fed’n of Indep. Bus.,

7 In 2014, the tax is the lesser of $95 or 1% of taxable income.

26 U.S.C. § 5000A(c)(2)(B)(a), (c)(3)(B) (2012). In 2016, the tax

increases to $695 or 2.5% of taxable income. Id. § 5000A(c)(2)

(B)(ii1), (c)(3)(D) (2012).

23

132 S. Ct. at 2607 (making Medicaid expansion a

state option).

Currently, 28 states and the District of

Columbia have chosen to expand Medicaid eligibility

under the ACA. State Decisions, supra. Those living

between 100 and 138% of poverty in states that do

not expand may purchase coverage on the Exchanges

and qualify for premium tax credits and cost-sharing

reductions. 26 U.S.C. § 36B(b)(3)(A) (2012); 42

U.S.C. § 18071(c)(2) (2012). About 1.3 million low-

income pre-Medicare adults who did not have

employer-sponsored health insurance in 2012 had

incomes between 100 and 138% of poverty. Effect of

Health Reform, supra, 7 fig. 2. These low-income pre-

Medicare adults could qualify for Medicaid or, if their

state of residency is not expanding Medicaid

eligibility, for tax credits on the Exchanges.

Considering the reforms discussed ahove (and

others not discussed here), the CBO and Joint

Committee on Taxation project that by 2025, 27

million more people under the age of 65 will have

insurance coverage than would have had without the

ACA. Cong. Budget Office, Jnsurance Coverage

Provisions of the Affordable Care Act—-CBO's

January 2015 Baseline, tbl. B-2 (2015) [CBO January

2015 Baseline]. These gains in coverage represent a

9.4% decrease in the uninsured rate due to ACA

reforms, the vast majority of which will result from

insurance purchases on the Exchanges. Id. (24

million will be insured through purchases on the

Exchanges and 16 million through Medicaid and

CHIP).

24

IV. Premium Tax Credits Were Meant to

Incentivize Individuals, Not States.

The text and structure of the ACA support the

conclusion that premium tax credits were provided to

incentivize individuals to participate in the

individual health insurance market, not to

incentivize states to establish Exchanges. Like the

individual mandate and the federal tax enforcing it,

see 26 U.S.C. § 5000A(b), premium tax credits are

directed at individuals and enforced through federal

mechanisms. The amount of the credit depends on

the individual's household income. 2a US.C.

§ 36B(b)(3)(A)G) (2012). Additionally, premium

credits are available as an advance payment to the

individual or are payable directly to the individual's

insurer as a refundable federal income tax credit. 26

U.S.C. § 36B(f) (2012); 42 U.S.C. § 18082(c) (2012).

Petitioners cite no credible authority for their

proposition that Congress intended to use premium

tax credits to “induce states to act” to establish

Exchanges. Pet’rs’ Br. 40-41. Instead, Petitioners

argue that “legislative history is irrelevant” because

the text that they allege limits premium tax credits is

“piain” and “causes [no] objective absurdity.” Pet’rs’

Br. 39 (emphasis removed). One claim begs the

question and the other based on faulty premises.

Petitioners read four words in the Act out of context

(ignoring various provisions that give additional

meaning to these words) and in doing so create the

most absurd result—dismantling the very reforms

that the Act was written to effectuate. See infra

Parts V and VI. Additionally, Petitioners speculate

25

that there was little discussion of Federally

Facilitated Exchanges in the legislative record “likely

because the consensus was that states would

establish their own.” Pet’rs’ Br. at 40 (emphasis

added). But such speculation is unnecessary when

one considers the detailed provisions in the Act

regarding the operation of Exchanges, as they show

that Congress structured the Federally Facilitated

Exchanges to function in the same way as the State-

established Exchanges, including the function of

pricing premiums based on income qualification for

premium tax credits. See 42 U.S.C. § 18041(c)(1)

(2012) (directing the Secretary of HHS to “establish

and operate such Exchange” if the state failed to do

so) (emphasis added); § 18031(d)(4) (detailing the

minimum functions of “[aJn Exchange,” including

electronic calculation of the actual cost of coverage

after the application of premium tax credits and cost-

sharing reductions); see also Resp’ts’ Br. 25.

Finally, Petitioners claim that “what history

does exist” supports their argument that Congress

intended to use premium tax credits to induce states

to establish Exchanges. Pet’rs’ Br. 41. But this one-

sided view of “history” is incomplete and out of

context. The cited draft proposal of the Health

Education Labor and Pensions Committee, S. 1679,

explicitly stated that, as a condition of eligibility for

tax credits, states must establsh their own

Exchanges. S. 1679, lllth Cong. § 3104(a), (d)

(2009). In contrast, the ACA does not contain such

an expressly confining condition. Petitioners suggest

that the ideas in the S. 1679 proposal were borrowed

from Timothy S. Jost. Pet’rs’ Br. 41. However, they

26

fail to point out that, in the cited article, Professor

Jost also made two other suggestions of how

Congress could tincentivize states to establish

Exchanges, that these other suggestions do not

condition tax credits on the establishment of state

Exchanges, and that these other suggestions do

appear in the text of the ACA. See Timothy S. Jost,

Health Insurance Exchanges: Legal Issues 7 (2009)

(“Congress could invite state participation in a

federal program, and provide a federal fallback

program to administer exchanges in states that

refused to establish complying exchanges [or

offer] explicit payments to states that establish

exchanges conforming to federal requirements.”); cf.

42 U.S.C. §§ 18041(c) (2012) (providing a federal

fallback program to administer exchanges in states

that refuse to establish their own), 18031(a)

(providing grants to states that establish their own

exchanges).

In the end, what the history shows is that a

proposal to condition premium tax credits on states

establishing Exchanges never made it out of

Committee, but the idea of establishing federal

fallback Exchanges that would function in the same

way as State Exchanges was enacted into law.®

8 Though Jonathan Gruber’s statements of opinion made after

the passage of the ACA are no evidence of Congressional! intent,

Petitioners rely on these statements to support their claim that

Congress intended to use premium tax credits to incentivize

states to establish Exchanges. Pet’rs’ Br. 4-5, 42-43. Not only is

their reliance on these statements inapposite, but the

statements were taken entirely out of context and, thus, do not

support the argument. To ensure that his comments were

interpreted in the relevant contemporaneous context, Gruber

27

Congress may have created other incentives for

states to establish Exchanges, see, e.g., 42 U.S.C. §

18031(a) (authorizing federal grants to states), but

the individual premium tax credit is not one of those

incentives.

V. Premium Tax Credits are Essential to the

Act’s Primary Purpose—Achieving Access

and Affordability for All.

Analysis of the available data on insurance

purchases on the Exchanges coupled with analyses of

the potential effects of eliminating premium tax

credits in the 34 states with Federally Facilitated

Exchanges confirm what Congress knew when it

structured the ACA’s interlocking reforms: premium

tax credits are essential to achieving the Act's

primary purpose of achieving access and affordability

for all. If premium tax credits become unavailable in

the Federally Facilitated Exchanges, health

insurance will once again become unaffordable for

testified that he was referring to “the possibility that the federal

government, for whatever reason, might not create a federal

exchange. If that were to occur, and only in that context, then

the only way that states could guarantee that their citizens

would receive tax credits would be to set up their own

exchanges” Jonathan Gruber, Written Testimony of Professor

Jonathan ruber before the Committee on Oversight and

Governmen. Reform, U.S. House of Representatives, December 9,

2014, at 2 (2014), http://goo.gl/nlIXHpO; see also Jonathan

Gruber at Noblis, at %31:26-32:23, Jan. 18, 2012,

http://goo.gVIkNrFs (including portion of video omitted from

Petitioners’ citation). If the Court is inclined to consider Mr.

Gruber’s opinion, it sheuld consider his full opinion as expressed

in sworn testimony.

28

millions in the private individual market including

those who do not qualify for premium tax credits—

drastically reducing access and affordability for all.

A. If Premium Tax Credits Are

Eliminated on the Federally

Facilitated Exchanges, Health

Insurance Will, Once Again, Become

Unaffordable and Inaccessible for

Millions of Low- to Moderate-Income

Americans.

1. Those Who Qualify for Premium

Tax Credits Will Find Insurance

Unaffordable and Become

Uninsured.

Millions would lose premium tax credit

assistance and become uninsured if the Court accepts

the Petitioners’ acontextual interpretation of the Act.

In the initial 2014 enrollment period, 4.7 million

(86%) of those who selected a plan via Federally

Facilitated Exchanges did so with premium tax credit

assistance. U.S. Dep’t of Health & Human Servs.,

Health Insurance Marketplace: Summary Enrollment

Report for the Initial Annual Open Enrollment

Period: October 1, 2013 -- March 31, 2014, at 19

(2014) [Initial Enrollment Report),

http://goo.gl//w1B1S5.9 During the first two months of

9 Over 6.6 million people qualified for premium tax assistance

on all the Exchanges, surpassing the CBO’s estimate by 1.6

million. Jnitial Enrollment Report, supra, 19; Cong. Budget

Office, Updated Estimates of the Effects of the Insurance

Coverage Provisions of the Affordable Care Act, April 2014 at 10

29

the 2015 open enrollment period, another 6.1 million

(87%)! of those who selected a plan on the Federally

Facilitated Exchanges qualified for premium tax

credits. See U.S. Dep’t of Health & Human Servs.,

Health Insurance Marketplace 2015 Open Enrollment

Period: January Enrollment Report For the Period:

November 15, 2014 — January 16, 2015, at 3, 25-26

tbl. B4 (2015) [2015 Open Enrollment January

Report], http://goo.gl/P1D 112.

Because 2015 open enrollment is ongoing and

because the availability of tax credits affects market

competition and affordability on the Exchanges,

various studies have attempted to mode! the effects

of losing premium tax credits in the 34 states with

Federally Facilitated Exchanges based on available

data and other assumptions. One such study

concluded that an estimated 9.3 million people will

lose premium tax subsidies in 2016. Linda J.

Blumberg, et al., Urban Inst., Characteristics of

Those Affected by a Supreme Court Finding for the

Plaintiff tn King v. Burwell 2 (2015) [Characteristics

tbl. 3 (2014). The CBO did not differentiate between State

Exchanges and Federally Facilitated Exchanges.

10 This percentage was calculated for 37 states to include the

three states that have State Exchanges but use the

Healthcare.gov platform (Nevada, New Mexico, and Oregon).

See 2015 Open Enrollment January Report, supra, 3, 25-26 tbl.

B4. When one excludes enrollment in those states, the

percentage remains the same. Jd. The 6.1 million figure also

excludes those three states. Id.

30

of Those Affected}.'1 Of those, two thirds will become

uninsured. Jd. 2-3. The 1.1 million who are in the

lowest income bracket for tax credit eligibility—100

to 138% FPL—will be most adversely affected when

they become uninsured, as they are living in states

that did not expand Medicaid eligibility under the

ACA and thus will not have other alternatives for

affordable coverage. Id. 3-4 tbl. 1.

2. The Effectiveness of the Individual

Mandate in Increasing and

Diversifying the Insurance Risk Pool

Will Be Significantly Hampered,

Making Health Insurance Less

Affordable for Everyone in the Private

Individual Insurance Market.

The function of the individual mandate, to

increase the number of insured, would be

\\ “Estimates presented in this analysis reflect effects at a point

in time, and therefore understate the number of people who

would be affected over the course of a year and over multiple

years...... Id. Though the long-term effects of eliminating tax

credits on the Federally Facilitated Exchanges are nearly

impossible to predict, there are some projections that shed light

on the magnitude of the potential impact. See eg., CBO

January 2015 Baseline, supra, tbl. B-3 (not differentiating

between State and Federally Facilitated Exchanges, the CBO

projected that by 2018, 19 million will purchase insurance on

the Exchanges with the assistance of premium tax credits);

Kaiser Family Found., Marketplace Enrollees Eligible for

Financial Assistance as a Share of the Subsidy-Eligible

Population, April 2014 (Apr. 19, 2014), http://goo.gVEQ4iAZ

(last visited Jan. 28, 2015) (an additional 10.5 million people

qualified for tax credits during the 2014 open enrollment penod,

but did not enroll).

31

significantly weakened if premium tax credits were

eliminated in states with Federally Facilitated

Exchanges. Insurance premiums will become

unaffordable for millions who may then qualify for

the unaffordability exemption to the individual!

mandate or may opt to pay the tax penalty for

choosing to forgo coverage. See 26 U.S.C. §

5000A(e)(1)(A) (2012) (exempting individuals from

obtaining coverage when the cost of coverage exceeds

8% of household income); see also 26 U.S.C. §

5000A(c) (providing the tax penalty amounts for not

purchasing coverage). Though some of those loosing

tax credits would retain health insurance, either at

higher premium prices or through alternative

methods of gaining coverage (e.g., post-retirement

employment to gain employer-based coverage),

almost all of them (99%) would face premiums in the

individual market deemed unaffordable under the

ACA. See Characteristics of Those Affected 3, 7; see

also 26 U.S.C. § 5000A(e)(1)(A); 2015 Open

Enrollment January Report 22-24 tbl. B38 (96% of

those who applied for coverage were eligible for

premium tax credits).

Most of those who would become uninsured if

premium tax credits were eliminated reported being

in excellent, very good, or good health.

Characteristics of Those Affected 3, 6 (90.3% of those

losing tax credits and 92.1% of those with higher

incomes and ineligible for tax credits reported good or

better health). Consequently, these healthy people

are less likely to retain insurance that is significantly

more expensive. Id. 3 (67.9% of those in good or

better health will drop coverage compared to 58.2% of

32

those in fair or poor health). Without the ability to

attract more healthy people to the insurance risk

pool in states with Federally Facilitated Exchanges—

as tax credits currently do by reducing premiums by

an average of 76%—there would be fewer insurance

providers in the individual market thus reducing

competition and increasing premiums. See Amy

Burke et al., U.S. Dep’t of Health & Human Servs.,

Premium Affordability, Competition, and Choice in

the Health Insurance Marketplace, 2014, at 2, 17-18

(2014). Premiums may increase by 35 to 47 percent.

Evan Saltzman & Christine Eibner, Rand Corp., The

Effect of Eliminating the Affordable Care Act’s Tax

Credits in Federally Facilitated Marketplaces 2

(2015) [The Effect of Eliminating Tax Credits];

Characteristics of Those Affected, supra, 3. This

effect will be more pronounced in states that use

Federally Facilitated Exchanges because those states

have higher proportions of low-income residents, had

higher rates of uninsured residents pmor to

implementation of the ACA, and most did not pursue

Medicaid Expansion under the ACA. Id. 6.

The rising costs of health insurance premiums

will affect everyone in the individual market—in

State Exchange markets, in plans sold outside of the

Exchanges, and even for those who have higher

incomes that make them ineligible for tax credits.

One study estimated that changes in premium prices

would make 3% of those who purchased health

insurance on the State Exchanges eligible for the

unaffordability exemption to the individual mandate.

Larry Levitt & Gary Claxton, Kaiser Family Found.,

The Potential Side Effects of Halbig (Jul. 31, 2014),

33

http://goo.g/GECcHt. Another study found that

“fejnrollment in the ACA-compliant individual

market, including plans sold outside of the

marketplaces that comply with ACA regulations,

would decline by 9.6 million.” The Effect of

Eliminating Tax Credits, supra, 2. Others have

estimated that 1.2 million people who would pay full-

price for their premiums will be uninsured because

premiums will become unaffordable. Characteristics

of Those Affected, supra, 3.

3. Coverage Losses in Public and

Group Insurance Markets Will

Undermine the Goal of Near-

Universal Coverage.

Not surprisingly, eliminating tax credits that

are so central to affordability and access—and thus

to achieving near-universal coverage—in_ the

individual insurance market will impact other

insurance markets as well. A sort of “reverse wood-

work” effect will occur when people who would

otherwise go to Federally Facilitated Exchanges to

investigate whether they are eligible for tax credits

no longer do so and, in the process, forgo discovering

that they and/or their family members are eligible for

publicly-funded insurance. /d. at 6 (estimating that

445,000 individuals fall into this’ category).

Additionally, changes in nongroup'- insurance

premiums will affect decisions about whether to offer

and accept employer-based group coverage. /d.

(estimating that 300,000 individuals fall into this

category). Taking all of these effects into

consideration, by one estimate, the number of

34

uninsured people would increase by 8.2 million in

2016. Id.

B. Eliminating Premium Tax Credits on

the Federally Facilitated Exchanges

Will Disproportionately Impact Low-

to Moderate-Income Pre-Medicare

Adults.

Older adults comprise nearly half of those who

enrolled for individual health insurance coverage

through Federally Facilitated Exchanges. Initial

Enrollment Report, supra, 20 tbl. B1 (22% ages 45 to

54 and 25% ages 55 to 64); 2015 Open Enrollment

January Report, supra, 12 tbl. Al (22% ages 45 to 54

and 27% ages 55 to 65). Premium tax credits will be

especially important to pre-Medicare adults, given

their historic difficulty accessing affordable coverage.

For example, one study estimates that tax credits

will reduce the cost of monthly premiums by $433

(69%) for a Silver Plan for a 60-year-old with income

at 250% of the FPL in Indianapolis, Indiana (a state

with a Federally Facilitated Exchange). See Cynthia

Cox et al., Kaiser Family Found., An Early Look at

Premiums and Insurer Participation in Health

Insurance Marketplaces, 2014, at 6 (2013). Without

premium assistance, this 60-year-old could pay $626

per month for this plan, representing 26% of her

monthly income.!2 Given the high cost of insurance

relative to income, this 60-year-old may opt to forgo

12 Two hundred and fifty percent of the FPL in 2013, when this

study was conducted, is an annual income of $28,725 and a

monthly income of about $2,394. See Annual Update of the

HHS Poverty Guidelines, 78 Fed. Reg. 5,183 (Jan. 24, 2013).

35

health insurance altogether and seek an affordability

exemption. See 26 U.S.C. § 5000A(e)(1)(A) (the

unaffordability exemption is available when the cost

of coverage exceeds 8% of household income). This

example illustrates that, for low- to moderate-income

people, assistance with their premiums will be the

difference between coverage that is affordable and

coverage that is out of reach. Indeed, 38.5% of those

who would lose tax credits and become uninsured are

between the ages of 45 and 64, a rate higher than

any other age group. See Characteristics of Those

Affected, supra, 2, 4 tbl. 1.

VI. Eliminating the Availability of Premium

Tax Credits in 34 States Will Cannibalize

the Act’s Key Reforms and Jeopardize

Lives.

The availability of premium tax credits in all

states is essential to achieving the ACA’s central

purpose. This is evident not only from the effect that

the elimination of premium tax credits has on

affordability, both in terms of individual affordability

and the overall effect it has on premium prices in the

insurance markets, but also from the effect it has on

many other reforms central to the ACA.

A. Eliminating the Availability of

Premium Tax Credits in 34 States Will

Render Other Interconnected ACA

Reforms Meaningless.

All other ACA reforms designed to make

coverage more accessible, such as the guaranteed

36

issue provisions and limitations on age rating, will be

meaningless to those who cannot afford the

premiums. See supra Parts III.B.1-3. Moreover,

eliminating assistance with premiums in the 22

states with Federally Facilitated Exchanges that are

also not expanding Medicaid eligibility means that

low-income residents in these states will not have

new options for affordable coverage. See supra Parts

11.B.4 and V.A.1; see State Decisions, supra.

Additionally, according to Petitioners’ interpretative

theory, employers in 34 states would be able to evade

the employer mandate simply because their state

chose not to establish its own Exchange—thus

eliminating another important reform designed to

increase access to affordable care. See supra Part

I1I.B.1. It is implausible, to say the least, that

Congress intended to allow the entire Act to be

cannibalized by a state’s choice not to establish its

own Exchange.

B. Premium Tax Credits, and the ACA,

Have Saved the Lives of Pre-Medicare

Adults Who Were Previously

Uninsured, Underinsured or Denied

Adequate, Affordable Health

Insurance Due to Their Age or

Preexisting Conditions.

Premium tax credits don’t just make insurance

affordable and make other ACA reforms work—they

save lives. Among the pre-Medicare adults who

credit the ACA with saving their lives is Lisa Gray, a

62-year-old small business owner in Alexandria,

Virginia, who obtained affordable coverage just in

37

time to receive the treatment that eradicated a rare

leukemia discovered during an unrelated visit to the

emergency room. See Noam N. Levey, Obamacare’s

Guaranteed Health Coverage Changes Lives in First

Year, LA Times, Jan. 4, 2015, http://goo.gl//AqDqQ3.

Like many pre-Medicare adults prior to the

implementation of the ACA, Lisa bought an

expensive insurance plan on the individual market

that did not provide sufficient coverage. She was

paying $1,095 per month in premiums, but her plan

covered only $1,500 of the $6,809 monthly cost of the

life-saving oral chemotherapy that her doctor

prescribed. Jd. Though she tried desperately to find

a way to pay for the drug, she earned too much to

qualify for public insurance or the assistance

programs offered by drug companies, and she could

not seek another insurer because she would be

denied coverage due to her preexisting condition. Id.

After months of finding ingenious ways to finance her

treatment or sometimes suffering the consequences

of going without it, she finally obtained health

insurance through Healthcare.gov for $315 less in

premiums and only $30 per month co-pay for her

prescription. Jd. Lisa was now able to afford the

drug that her doctor prescribed and within nine

months her biopsy showed no signs of leukemia. Id.

The life-saving power of affordable health

insurance does not discriminate based on politics or

ideology. Dean Angstadt—a 57-year-old, self-

employed logger who self-insured and who opposed

the ACA—personally experienced that power when

he enrolled for health insurance’ through

Healthcare.gov just in time to have the aortic valve

38

replacement surgery that he could not afford and

that saved his life. See Robert Calandra, Once

Opposed to ACA, Now a Convert, Philadelphia

Inquirer, Apr. 28, 2014, http://goo.gl//D48Cgt. His

first monthly premium was only $26.11. Jd. As

someone who had the ability to obtain affordable,

life-saving health insurance with the assistance of

premium tax credits in a state with a Federally

Facilitated Exchange, and commenting on the politics

surrounding the ACA, Dean stated: “From my own

experience, the ACA is everything it’s supposed to be

and, in fact, better than it’s made out to be.” 7d.

Though some who are politically opposed to the ACA

question whether saving lives is worth the cost, that

cost-benefit analysis was rightfully done by Congress.

See, e.g., Michael F Cannon, New Study Suggests

RomneyCare Saved Lives, But at a Very High Cost,

Forbes, May 5, 2014, http://goo.gl/FyRrOW. Congress

decided to provide federal tax assistance to low- to

moderate-income people in order to effectuate the

purpose of the Act to make affordable, lifesaving,

health insurance accessible to all—not just to those

whose state leaders share their political views.

CONCLUSION

Premium tax credits are critical to ensuring

that all Americans, and in particular pre-Medicare

adults, have access to adequate, affordable health

insurance, and thus health care. Reading the ACA to

limit premium tax credit eligibility only to people

who live in states that operate an Exchange will

make insurance unaffordable and inaccessible to

millions of low- to moderate-income Americans in the

39

34 states with Federally Facilitated Exchanges and

even to those who do not qualify for the tax credits,

will cannibalize the Act’s key reforms, and will put

countless lives in jeopardy—results that are plainly

contrary to the purpose the ACA. Because

Petitioners’ limitation on the availability of premium

tax credits would “bring about an end completely at

variance with the purpose of the statute,” it must be

rejected. United Steelworkers v. Weber, 443 U.S. 193,

202 (1979) (statutory prohibition on discrimination

“because of race” did not prohibit voluntary race-

based affirmative action). The Fourth Circuit Court

of Appeals’ ruling should be affirmed.

JANUARY 2015. Respectfully submitted,

Stuart R. Cohen

Counsel of Record

Iris Y. Gonzalez

AARP Foundation Litigation

601 E Street, NW

Washington, DC 20049

(202) 434-2060

scohen@aarp.org

Jane Perkins

National Health Law Program

101 E. Weaver St., Suite G-7

Carrboro, NC 27510

(919) 968-6308

perkins@healthlaw.org

Counsel for Amici