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

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No. 14-114 —

In The

Supreme Court of the An

DAVID KING, ET AL.,

Petitioners,

SYLVIA MATHEWS BURWELL,

AS U.S. 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 THE COMMONWEALTHS OF

VIRGINIA, KENTUCKY, MASSACHUSETTS, AND

PENNSYLVANIA, THE STATES OF CALIFORNIA,

CONNECTICUT, DELAWARE, HAWAII, ILLINOIS,

IOWA, MAINE, MARYLAND, MISSISSIPPI,

NEW HAMPSHIRE, NEW MEXICO, NEW YORK,

NORTH CAROLINA, NORTH DAKOTA, OREGON,

RHODE ISLAND, VERMONT, AND WASHINGTON,

AND THE DISTRICT OF COLUMBIA AS AMICI

CURIAE IN SUPPORT OF AFFIRMANCE

MARK R. HERRING STUART A. RAPHAEL*

Attorney Genera! Soliciter General

of Virginia of Virginia

CYNTHIA BAILEY *Counsel of Record

Deputy Attorney General TREVOR S. Cox

KIM PINER Deputy Solicitor General

Senior Assistant

Attorney Generel a OF THE ATTORNEY

CARLY L. RUSH a

Assistant Attorney 900 East Main Street

iemendl Richmond, Virginia 23219

(804) 786-7240

January 28, 2015 sraphael@oag.state.va.us

Counsel for Amici Curiae

[Additional Counsel Listed On Signature Page]

COCKLE LEGAL BRIKFS (800) 726-6964

WWW COCKLELEGALBRIEFS COM

QUESTION PRESENTED

The Patient Protection and Affordable Care Act

provides premium-assistance tax credits to help low-

and moderate-income Americans purchase health

insurance through a State-specific marketplace called

an “Exchange.” Two subsections of 26 U.S.C. § 36B

describe the formula for calculating the tax credit in

reference to a health plan enrolled in through an

“Exchange established by the State under [§] 1311

[42 U.S.C. § 18031].” The Act requires that each

State “shall .establish .an .. Exchange. for

the State,” 42 U.S.C. § 18031(b)(1), and provides that

if a State does not establish the “required Exchange,”

the Secretary of Health and Human Services (HHS)

shal] establish and operate “such Exchange,” 42

U.S.C. § 18041(c)(1). The term “Exchange” is defined

as “an American Health Benefit Exchange estab-

lished under section 18031 of this title.” 42 U.S.C.

§ 300gg-91(d (21).

The Internal Revenue Service (IRS), through

notice-and-comment rulemaking, interpreted the Act

to make tax credits available both in a State that

establishes the required Exchange for itself and in a

State that allows HHS to establish “such Exchange”

in its stead. 26 C.F.R. § 1.36B-1(k); see 77 Fed. Reg.

30,377, 30,378 (2012).

The question presented is whether the IRS

permissibly interpreted the Act to make premium-

assistance tax credits available through the Exchanges

in every State.

TABLE OF CONTENTS

Page

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INTEREST OF AMICI CURIAE.......................... l

SUMMARY OF ARGUMENT .......................220000. 2

INT sae dpicccashictinsiervcusenseaesnicmeneneninenenasisccens 3

I. In the nation’s thirty-four FFE States,

millions of citizens depend on tax credits

to afford the health insurance that the

ACA requires them to purchase ................ 3

II. Petitioners’ interpretation would destroy

State insurance markets and render the

Mi i a sa ciamwens i)

Ill. Petitioners’ interpretation of the ACA is

untenable under the Pennhurst doctrine

because Congress did not give the States

clear notice of the alleged consequences

of relying on a federally-facilitated Ex-

I aia data ditesncebecesnnicobaehdncsvteieicbsenstaenmaten 12

A. The Pennhurst doctrine requires that

Congress give States clear notice of

conditions imposed under cooperative-

FSGeraliaGs PLOBTAIIGE. «...06....6005000006008600 12

B. The States selected among Exchange

options without clear notice that the

choice could harm their citizens and

disrupt their insurance markets......... 15

ill

TABLE OF CONTENTS—Continued

Page

C. The States had no clear notice from

the text, structure, purpose or history

of the ACA that citizens in FFE

States would be denied premium-

assistance tax Credits ...............c0.0..0000- 27

IV. The constitutional-doubt canon also coun-

sels against Petitioners’ ACA interpretation,

which raises serious questions under the

ES ESSE SEEN SE ALAA IE TD, BSE 42

CONCLUSION............ Ne este OB el SMa is ad 45

TABLE OF AUTHORITIES

Page

CASES

Abramski v. United States,

Be ae es I ees 29, 30

Arlington Cent. Sch. Dist. Bd. of Ed. v. Murphy,

ee ee aunaoeenaae 13, 27

Bond v. United States,

oR Be Bt a RR a ee Ree se 15

Bond v. United States,

ei es re ar ce eens 44

Chisom v. Roemer,

ee enone 40

Crowell v. Benson,

i oe ee Cr ee ee ee 42

Halbig v. Burwell,

758 F.3d 390 (D.C. Cir. 2014),

reh’g en banc granted, judgment vacated,

No. 14-5018, 2014 WL 4627181 (D.C. Cir.

I i i hess ected umenions 4,10, 39, 41, 42

Halbig v. Sebelius,

No. CV 13-0623 (PLF), 2014 WL 129023

a sees pndmavsvabiaionins 42

King v. Burwell,

759 F.3d 358 (4th Cir. 2014) ..................... 4,9, 37, 42

King v. Sebelius,

997 F. Supp. 2d 415 (E.D. Va. 2014),

aff'd sub nom. King v. Burwell,

Fee ee ee Ce GA COD vhinseietesncngycksnechvcecssnseand 42

TABLE OF AUTHORITIES—Continued

Page

Lebron v. Natl R.R. Passenger Corp.,

ee ee ee eas cinsak bccabascnachucsasewumesneocieken 33

McCarthy v. Bronson,

es eee a sats ald al a eecaettdantuasmtianenonds 29

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

ae a ks a Case hicclcncikinkccctbsreatencasaesics passim

New York v. United States,

es ith aoe tances ore Sy eee 14, 43

Pennhurst State Sch. & Hosp. v. Halderman,

Be se Pectin tase natunbuseecincietsakstoanesens passim

Printz v. United States,

UE Pcecadadaaseschatdbcconachinnircincspamtovancienl 43

U.S. Nat'l Bank v. Indep. Ins. Agents of Am.,

Sy ets I Oc oc an ne saeaeh panels cena 29

United States ex rel. Att'y Gen. v. Del. &

Hudson Co.,

Ie rr NO ec 42

United States v. Heirs of Boisdore,

LM pc ae eaten ES BEE Sie tapers ee 29

Util. Air Regulatory Grp. v. EPA,

Ra Re | SA teed ree nt Sem ete et te Om Pace 33

Whitman v. Am. Trucking Ass’ns,

ee ee ME I Da alo aetsas ocicceteeecoieruiesncettons 28

CONSTITUTIONAL PROVISIONS

By Oe NI MINNIE. FE wicseccsccceintsveecresacass 3, 11, 42, 43, 44

TABLE OF AUTHORITIES—Continued

Page

STATUTES

Bee Seas TF NN i Peccewcvcesavecesccciowcsncansinscbesceasaacers 13

26 U.S.C.

Festa td a trea esotts intl Bad SERA Siete ead passim

RS t RRR OEE Ds EE RES AE ah yp eee ew ee 5

Se NIE catececesectnvcek class caceutewvcercoda-sannodsestns 28, 32

Oe Ne cece cp ecanaet coer ila cri ua cdravcdeaspsoavericesseie 5

GT aE CRE SE SAE etait carne 28

a a ha a gk ad dada Dota caenwapey 32

EE Ache tt Mer en oo a ahr oe 30

aE pet aa 6 Re eSB Sec rN rer 30

ae a oo ev ammcenay 36

fA en CAAA SU ot dae LCR A Oe Aer were ae ee a Ow 30

ELE LIE SNR ee eee Enercon 36

Be aka EAS Ae SA ae ee PE 36

ND cre tatoos ecais aa tracth cocrancasadaounduneiwetentdonenn 36

I rain onc lee acer cevas sa aobeatocenvesaetabonpensent 36

Be NE REE EN Gol APS Oto SE el AO 4

I cad iol col Shaairiapaniennt 6

42 U.S.C.

EE Raccneussaunasecus srccrsacasarsasncbibeskanetanens i, 31

Be erie dedicat velequatennyoladeseritenitedenseenereeeseehi 35

it Sl koldstdsadvetensnsnasinnsasvoneresecsencnptinis i, 30, 31, 33, 35

Vii

TABLE OF AUTHORITIES—Continued

Page

ROB EIB oseccncecscaccecccsscnsssansseesedscaiscacencseaeeeaaee 31

DS LBOG RO). .escecesccvesexsssssucsanavcudeesasseeenscnianbints aera 31

BS PROG ECID) cece cescenccorcmsnac cee i, 5, 31, 32, 34

BD BI ncencnsisescvansecvsssnsesssseccznanteaseesan ie ae 33, 34

DS RING) evccccvecevnvevosncsssksepiecabaouteneea cee 33, 34, 37

§ DOOBIO 1) ...ncccvccvcievicivocansacennentessnasienninueeeenneaane 34

The Patient Protection and Affordable Care Act,

Pub. L. No. 111-148, 124 Stat. 119................. passim

2011 Haw. Sees. Law, Ait DOO cccccesssecevccessesunsssaan 21

Idaho Code Ann. § 41-6102 (West 2014)............0...... 21

N.H. Rev. Stat. Ann. § 420-N:10(1)(h)(1) (2014) ........ 18

REGULATIONS AND ADMINISTRATIVE MATERIALS

BE CBR. § 1.BG- RR) icc scccccsscsvceconecsseuseateeee i, xix

4B CPR. § UGB DD ces ccoucesncsnnsinaccsavssevconsetensteaeee xix

77 Fed. Rew. 16,310 (BOLD) 0... :ccsscccssssersicesenneunaene xix, 4

77 Fed. Reg. 30,377 (2012) .........ssccscccsssseceseseeecsvens i, xix

Vil

TABLE OF AUTHORITIES—Continued

Page

Exec. Order (Beshear) No. 2012-587 (Ky. 2012),

http://apps.sos.ky.gov/Executive/Journal/exec

journalimages/2012-MISC-2012-0587-

Exec. Order (Chafee) No. 11-09 (R.I. 2011),

http://www. healthcare.ri.gov/documents/Exec

%200rder%2011-09%20as%20Signed. pdf ....... 21, 32

Exec. Order (Cuomo) No. 42, 9 N.Y.C.R.R.

a 20

LEGISLATIVE MATERIALS

155 Cong. Rec. $11,964 (Nov. 21, 2009)... 37

155 Cong. Rec. $12,358 (Dec. 4, 2009)......000 00... 38

155 Cong. Rec. $12,779 (Dec. 9, 2009)....................... 38

155 Cong. Rec. $13,375 (Dec. 17, 2009)..................... 38

155 Cong. Rec. $13,559 (Dec. 20, 2009).............000002.. 38

Health Insurance Exchanges: Progress Report:

Hearing Before the Sen. Comm. on Fin., 113th

ag SE a a 19

Verbatim Transcript, Markup of the Reconcilia-

tion Act of 2010, H. Comm. on Budget, 111th

Cong., 2010 WL 941012 (Mar. 15, 2010)................ 39

Wash. H.B. Rep.,

SSB 5445, 2011 Session (2011),

http://apps.leg.wa.gov/documents/billdocs/

2011-12/Pdf/Bill%20Reports/House/5445-

S%20HBR%20APH%2011. pdf ............ cee 17, 32

TABLE OF AUTHORITIES—Continued

Page

OTHER AUTHORITIES

Jonathan H. Adler & Michael] F. Cannon,

Taxation Without Representation: The Illegal

IRS Rule to Expand Tax Credits Under the

PPACA, 23 Health Matrix 119 (2013) .........00000.0.... 39

Vikram David Amar,

Why the Federalism Teachings from the 2012

Obamacare Case Weaken the Challengers’

Case in King v. Burwell, Verdict (Dec. 5,

2014), http://verdict.justia.com/2014/12/05/

federalism-teachings-2012-obamacare-case-

weaken-challengers-case-king-v-burwell............... 30

Arkansas Medicaid,

Proposed Amendment to Health Care Inde-

pendence (aka Private Option) 1115 Waiver,

https://www.medicaid.state.ar.us/general/

comment/demowaivers.aASPpX ................cc.00eeeecceeeeeeee 35

Press Release, Office of Alabama Governor

Robert J. Bentley, Governor Bentley

Announces Alabama Will Not Set Up

State Insurance Exchange (Nov. 13, 2012),

http://governor.alabama.gov/newsroom/2012/

11/governor-bentley-announces-alabama-

will-not-set-up-state-insurance-exchange’............. 24

TABLE OF AUTHORITIES—Continued

Page

Linda J. Blumberg, Matthew Buettgens &

John Holahan,

The Implications of a Supreme Court

Finding for the Plaintiff in King vs. Burwell:

8.2 Million More Uninsured and 35% Higher

Premiums (Jan. 2015),

http//www.urban.org/U ploadedPDF/2000062-

The-Implications-King-vs-Burwell.pdf .......... 7, 8, 11

Jonathan Cohn,

Jonathan Gruber: ‘It Was Just a Mistake,’

An Obamacare architect explains a 2012

quote that’s fueling critics, New Republic

(July 25, 2014),

http://www.newrepublic.com/article/118851/

jonathan-gruber-halbig-says-quote-

exchanges-was-mistake ......................ccc.ccseeeeeeeeeeees 41

Sarah Dash, et al.,

The Ctr. on Health Ins. Reforms,

Georgetown Univ. Health Policy Inst.,

Implementing the Affordable Care Act: State

Decisions about Health Insurance Exchange

Establishment (Apr. 2013),

https://georgetown.box.com/shared/static/

pfmjd22o0f}03z7qes8w3.pdf....................0006 16, 17, 18

Press Release, Office of the Governor, Deal:

Georgia will not set up state exchange

(Nov. 16, 2012),

http://gov.georgia.gov/press-releases/2012-11-

16/deal-georgia-will-not-set-state-exchange .......... 24

TABLE OF AUTHORITIES—Continued

A. Doyle,

The Complete Sherlock Holmes (1927)..................

Christine Eibner & Evan Saltzman, RAND Corp..,

The Effect of Eliminating the Affordable

Care Act’s Tax Credits in Federally

Facilitated Marketplaces (Jan. 2015),

http://www.rand.org/pubs/research_reports/

a el St | Be tellin eath, its MR Ah a 10,

Amirah Ellis & Edward Ratledge,

Univ. of Delaware,

Delaware and the Patient Protection

Affordable Care Act (updated Aug. 2011),

http://dhss.delaware.gov/dhcc/files/

issuebrief. pdf

CCCP TOR ET EO RR OER eT FP eR eee ee eee

Eric Eyre,

W.Va. and feds to share health insurance

exchange, W. Va. Gazette (Dec. 10, 2012),

http://www.wvgazette.com/News/

HRI Eni rena TER es is PERSE oe ee

Press Release, Governor Mary Fallin,

Governor Fallin Announces Extension

of Insure Oklahoma (Sept. 6, 2013),

http://www.ok.gov/triton/modules/newsroom/

newsroom_article.php?id=223&article_id=

12653

ee eee eee eee eee eee eee eee eee ee CPP PPP PP PPP PP TPP PPO Pee eee ee eee

TABLE OF AUTHORITIES—Continued

Page

Press Release, Governor Mary Fallin,

Gov. Fallin: Oklahoma Will Not Pursue

a State-Based Exchange or Medicaid

Expansion (Nov. 19, 2012),

http://www.ok.gov/triton/modules/newsroom/

newsroom_article.php?7id=223&article_id=9750 ....... 26

Georgia Health Ins. Exchange Advisory Comm.,

Report to the Governor (Dec. 15, 2011),

https://www.statereforum.org/system/files/

1797658 13ghix_final_report_to_the_governor.

Letter from South Carolina Governor Nikki R.

Haley to Senator Jim DeMint (July 2, 2012),

http-//governor.sc.gov/Documents/Letter% 20to

%20Senator%20DeMint. pdf .................. ce ceeceeees 24, 25

Health Mgmt. Assocs.,

Wakely Consulting Grp., Ji/linois Exchange

Strategic and Operational Needs Assessment,

Final Report (Sept. 2011),

http://egfa.ilga.gov/upload/final%20i1%20

exchange%20needs%20assessment%

FREESE STRAP EAS RCI 1d YE NE emis eee ee 17

Indiana Family & Soc. Servs. Admin..,

Healthy Indiana Plan 1115 Waiver Extension

I Ce. TE, TH hice ncinsitassicecnsacaseconstncsce 35

xiii

TABLE OF AUTHORITIES—Continued

Page

Ins. and Real Estate Comm.,

Joint Favorable Report (Ct. Mar. 15, 2011),

ftp://ftp.cga.ct.gov/2011/JFR/S/2011SB-

RE ON 22

Insure Tennessee,

Waiver Amendment Request, TennCare,

Demonstration Amendment #25,

https://news.tn.gov/sites/default/files/Insure%

20Tennessee%20-%20Waiver%20Amendment.

Iowa Dep’t of Human Servs.,

Iowa Marketplace Choice Plan 1115 Waiver

Application,

http://dhs.iowa.gov/sites/default/files/

IAMktplaceChoice1115_Final.pdf .............0......00.... 35

lowa Dep’t of Human Servs.,

Towa Wellness Plan 1115 Waiver Application

(Aug. 2013),

http//dhs.iowa.gov/sites/default/files/[AWellness

te Ir INO sch cach alcoves onidesicsathadadiskckceuswnmmates 35

Kaiser Family Found.,

Subsidy Calculator (2015),

http://kff.org/interactive/subsidy-calculator/............ 5

Letter from Governor John R. Kasich to

Dir. Gary Cohen, CMMS (Nov. 12, 2012),

http://www.governor.chio.gov/Portals/0/pdf/

11.16.12%20Letter%20to%20HHS. pdf................... 16

XiV

TABLE OF AUTHORITIES—Continued

Page

Larry Levitt & Gary Claxton,

Kaiser Family Found., The Potential

Side Effects of Halbig (July 31, 2014),

http://kff.org/health-reform/perspective/the-

potential-side-effects-of-halbig/ ...................... 6, 7, 10

Annie L. Mach & C. Stephen Redhead,

Cong. Research Serv., R43066, Federal Funding

for Health Insurance Exchanges (2014),

http://fas.org/sgp/crs/misc/R43066. pdf ................... 22

Letter from Governor Jack A. Markell to

Sec’y Kathleen Sebelius (Nov. 14, 2012),

https://www.cms.gov/CCIIO/Resources/

Technical-Implementation-Letters/

Dewnloads/de-exchange-letter.pdf ......................... 19

Maryland Health Care Reform Coordinating

Council,

Final Report and Recommendations

(Jan. 1, 2011),

http://marylandhbe.com/wp-content/uploads/

2012/10/HCRCC-FINALREPORT_jan20111.

Letter from Governor Robert F. McDonnell to

Sec’y Kathleen Sebelius (Dec. 14, 2012),

Amicus Br. for the Commonwealth of

Virginia on Behalf of Defs.-Appellees 25a,

King v. Burwell, 759 F.3d 358 (4th Cir. 2014)

ns Ce ee 18

TABLE OF AUTHORITIES—Continued

Page

Steve Mistler,

Outspoken critic of Obamacare helped to

turn LePage against state exchange,

Portland Press Herald (Nov. 23, 2014),

http://www. pressherald.com/2014/11/23/

outspoken-critic-of-obamacare-hel ped-to-

turn-lepage-against-state-exchange/...................... 27

Christine Monahan,

Halbig v. Sebelius and State Motivations to

Opt for Federally Run Exchanges, Ctr.

on Health Ins. Reforms (Feb. 11, 2014),

http://chirblog.org/halbig-v-sebelius-and-

state-motivations-to-opt-for-federall y-run-

IE ice orocarac reesei cecenis ivaseshccnecaauhee sas venbareneea 26

Nat'l Governors Ass'n,

State Perspectives on Insurance F'xchanges:

Implementing Health Reform in an Uncertain

Environment (Sept. 16, 2011),

http://www.nga.org/files/live/sites/NGA/files/

pdf/LlO9ONGAEXCHANGESSUMMARY.-PDF........ 17

Oregon Health Policy Bd.,

Building Oregon’s Health Insurance

Exchange, A Report to the Oregon Legislature

(Dec. 2010),

http://www.oregon.gov/oha/action-plan/

| PRESSES, AD I EAS AIRE SO DOPE ee:

Pennsylvania Dep’t of Pub. Welfare,

Healthy Pennsylvania 1115 Demonstration

Application (Feb. 2014),

http://www.dpw.state. pa.us/cs/groups/web

content/documents/document/c_071204.pef .......... 36

Xvi

TABLE OF AUTHORITIES—Continued

Page

Pub. Consulting Grp., Alaska Dep’t of Health &

Soc. Servs. Health Ins. Exchange Planning,

Final Report (June 21, 2012),

http://dhss.alaska.gov/Documents/Pdfs/

AKHealthExchangeReport2012.pdf....................... 16

Letter from Governor Pat Quinn to Gary

Cohen, Acting Dir., CMMS (Oct. 16, 2012),

https://www.cms.gov/CCIIO/Resources/

Technical-Implementation-Letters/

Downloads/il-exchange-letter. pdf .........................+ 20

Robert Wood Johnson Found.,

Health Policy Brief, Health Insurance

Exchanges and State Decisions (July 18, 2013),

http://www.rw)f.org/content/dam/farm/reports/

issue_briefs/2013/rwjf407092 ...0..... 0... eeeecceceeeeeeees 17

Antonin Scalia & Bryan A. Garner,

Reading Law: The Interpretation of Legal

SEE nee a 28, 34, 42

South Carolina Health Planning Comm.,

Improving the Health Care Marketplace in

South Carolina (Nov. 2011),

http://doi.sc.gov/DocumentCenter/View/253¢4 ........ 24

U.S. Dep’t of Health & Human Servs.,

Health Insurance Marketplace 2015 Open

Enrollment Period: December Enrollment

Report (Dec. 30, 2014),

http://aspe.hhs.gov/health/reports/2014/

MarketPlaceEnrollment/Dec2014/ib_2014

A No csaricscaksaunnabsbendabennabicneseieovennast) 6

XVll

TABLE OF AUTHORITIES—Continued

Page

U.S. Dep’t of Health & Human Servs.,

The Affordable Care Act is Working,

http//www.hhs.gov/healthcare/facts/factsheets/

2014/10/affordable-care-act-is-working.html........... 7

Washington Health Care Auth.,

Washington State Health Benefit Exchange

Program, Issue Brief #1: Goals and Value

of a Health Benefit Exchange (Jan. 1, 2011),

http://wahbexchange.org/wp-content/

uploads/HBE_Planning Grant_Goal.pdf............... 22

WV Health Benefits Exchange Stakeholder

Meeting Summary (May 9, 2012),

http://bewv. wvinsurance.gov/Portals/2/pdf/

ge Ee a ee 25

Written Testimony of Professor Jonathan

Gruber before the Comm. on Oversight &

Gov't Reform, U.S. House of Representatives

(Dec. 9, 2014),

http://oversight.house.gov/wp-content/

uploads/2014/12/Gruber-Statement-12-9-

IEE IIIIE accents rcienicnestonaniguwersebessnsdssnbinnsondeas 41

Joanne Young,

Heineman opts for federal health care ex-

change, Lincoln Journal Star (Nov. 15, 2012),

http://journalstar.com/news/state-and-

regional/statehouse/heineman-opts-for-

federal-health-care-exchange/article_c8b80018-

c57b-52c7-807c-807535e3533a.html..............0....2... 23

ACA

FFE

IRS Rule

Partnership

Exchange

Secretary

GLOSSARY

Patient Protection and Affordable Care

Act, Pub. L. No. 111-148, 124 Stat.

119, as amended by the Health Care

and Education Reconciliation Act of

2010, Pub. L. No. 111-152, 124 Stat.

1029.

Federally-facilitated Exchange. See 45

C.F.R. § 155.20.

Final regulations, Health Insurance

Premium Tax Credit, 77 Fed. Reg.

30,377 (May 23, 2012) (codified at 26

C.F.R. § 1.36B-1(k)).

A variation of a Federally-facilitated

Exchange in which HHS and States

work together on the operation of an

Exchange. See 77 Fed. Reg. 18,310,

18,325 (2012).

Secretary of the United States

Department of Health and Human

Services.

INTEREST OF AMICI CURIAE

The Commonwealths of Virginia and Pennsy]l-

vania and the States of Maine, Mississippi, North

Carolina, and North Dakota elected to forgo estab-

lishing their own Exchange under the ACA with the

understanding that relying on a federally-facilitated

Exchange would not harm State citizens or interfere

with State insurance markets. Sharing that same

understanding, the States of Delaware, Illinois, Iowa,

and New Hampshire implemented a _ federally-

facilitated Exchange through a partnership model,

retaining responsibility for certain core functions while

leveraging the shared federal infrastructure to ensure

financial viability. These amici are “FFE” States.

The States of California, Connecticut, Hawaii,

Maryland, New Mexico, New York, Oregon, Rhode

Island, Vermont, and Washington, the Commonwealths

of Kentucky and Massachusetts, and the District of

Columbia created their own Exchanges with the

understanding that the ACA would provide premium-

assistance tax credits to residents of all States. These

amici are State-Exchange States.

Whether an FFE State or a State-Exchange

State, every State in the union will be affected by the

outcome of this litigation. Petitioners’ erroneous

construction of the ACA would deprive millions of low-

and moderate-income Americans of billions of dollars

in federal premium assistance essential to buy health

insurance, thereby disrupting State insurance mar-

kets throughout the United States and threatening

the ability of the ACA to operate as a comprehensive

nationwide program.

Petitioners’ construction would also violate basic

principles of cooperative federalism by surprising the

States with a dramatic hidden consequence of their

Exchange election. Every State engaged in extensive

deliberations to select the Exchange best suited to its

needs. None had reason to believe that choosing a

federally-facilitated Exchange would alter so funda-

mental] a feature of the ACA as the availability of tax

credits. Nothing in the ACA provided clear notice of

that risk, and retroactively imposing such a new

condition now would upend the bargain the States

thought they had struck.

Accordingly, Amici States join together here to

urge the Court to affirm the judgment of the court of

appeals.

SUMMARY OF ARGUMENT

The ACA expressly offered States “flexibility”

with respect to the creation and operation of Ex-

changes. A State could establish an Exchange for

itself or rely on HHS to create one. But Petitioners

contend that that offer was not genuine. They claim

that Congress sought to pressure States to create

their own Exchanges, and to punish them for using

an FFE, by (1) making health insurance in FFE

States unaffordable to low- and moderate-income

citizens and (2) rendering insurance markets in FFE

States inoperable. That claim has no plausible basis

in the text of the statute. What is more, under the

Pennhurst doctrine, Congress must give States “clear

notice” of conditions imposed under cooperative-

federalism programs. There was no such clear notice

here. To the contrary, State officials reasonably

assumed that premium-assistance tax credits would

be available in every State, regardless of who created

the Exchange.

Petitioners’ interpretation should also be rejected

because it would raise serious questions under the

Tenth Amendment. Petitioners attribute to Congress

a novel kind of coercion that threatens State citizens

and State insurance markets as a means of pres-

suring State governments to take action. Not only is

such a scheme antithetical to the Act’s cooperative-

federalism model, but the constitutional-doubt canon

counsels against attributing such a coercive intention

to Congress.

ARGUMENT

I. In the nation’s thirty-four FFE States,

millions of citizens depend on tax credits

to afford the health insurance that the

ACA requires them to purchase.

As this Court recognized in National Federation

of Independent Business v. Sebelius (““NFIB”), Congress

enacted the ACA “to increase the number of Ameri-

cans covered by health insurance and decrease the

cost of health care.”’ The Court in NFIB upheld one

pillar of the ACA, the “individual mandate,” which

requires most Americans to maintain “minimum

essential coverage” for themselves and their depend-

ents.’ A second pillar rests on the guaranteed-issue/

community-rating provisions, which require insurers

to provide coverage and set premiums without regard

to a person’s medical history or prior medical condi-

tion. The third pillar, at issue in this case, is the

provision of premium-assistance tax credits, “an

essential component of the Act’s viability.” These

pillars are aptly characterized as three legs of the

stool; if one leg should fail, the stool will collapse.*

Each State was required to establish an Ex-

change by January 1, 2014.° Congress offered gener-

ous financial grants to assist them.” States were also

given substantial flexibility in choosing how to estab-

lish and operate Exchanges. But if a State elected

not to estal sh an Exchange, or failed to do so, the

' 132 S. Ct. 2566, 2580 (2012).

* 26 U.S.C. § 5000A(a). See NFIB, 132 S. Ct. at 2580, 2601.

* King v. Burwell, 759 F.3d 358, 375 (4th Cir. 2014).

* Halbig v. Burwell, 758 F.3d 390, 418-22 (D.C. Cir. 2014)

(Edwards, J., dissenting), reh'g en banc granted, judgment

vacated, No. 14-5018, 2014 WL 4627181 (D.C. Cir. Sept. 4, 2014)

(en banc).

* 42 U.S.C. § 18031(b\ 1).

* 42 U.S.C. § 18031(a).

" See generally 77 Fed. Reg. 18,310, 18,311 (2012).

ACA directed the Secretary to “establish and operate

such Exchange within the State.”

In order to help individual Americans afford the

health insurance that the individual mandate requires

them to buy, Congress provided tax credits to offset

the premium cost. In 26 U.S.C. § 36B, such credits

are provided to “an applicable taxpayer™ whose

family income is between 100% and 400% of the

federal poverty level.” The ACA also provides addi-

tional “cost-sharing reductions” to such individuals. "

It is impossible to overstate the importance of

those tax credits to enable low- and moderate-income

Americans to afford quality health insurance. For

instance, the Henry J. Kaiser Family Foundation’s

widely used subsidy calculator estimates that a single

36-year-old mother of two children living in Rich-

mond, Virginia, earning $25,000 a year (126% of the

federal poverty level), could purchase a silver-level

health-insurance plan for her family for an annual

premium of $3,001, with 83% of that cost ($2,498)

defrayed by the tax credit—meaning that she would

pay only $503 per year.” A single 52-year-old man

earning $20,000 (171% of the poverty level) would

* 42 U.S.C. § 18041(cx 1).

* 26 U.S.C. § 36Bia).

Id. § 36B(cK 1A).

" 42 U.S.C. § 18071(c).

" Kaiser Family Found., Subsidy Calculator (2015),

http://kff_org/interactive/subsidy-calculator/.

face a premium of $4,762, but 79% ($3,760) would be

covered by the tax credit, costing him only $1,002 per

year.

The subsidies are crucial to the ACA’s success.

Without them, “many if not most uninsured people

could not afford coverage.” Recognizing that low-

income Americans cannot be penalized for failing to

buy insurance they cannot afford, Congress exempted

those who fail to purchase health insurance if their

premium cost—after tax credits—would exceed 8% of

their household income. With federal subsidies

available, only 3% of those eligible for subsidies

would be exempt from the individual mandate.” In

other words, the ACA both encourages low-income

Americans to buy health coverage and ensures that

they have the means to do so.

Indeed, the proportion of enrollees relying on tax

credits is increasing. In the early months of the 2015

open-enrollment period, 87% of enrollees selected

plans using financial assistance (tax credits and

cost-sharing reductions), compared to 80% in the

early months of last year’s open-enrollment period.”

* Larry Levitt & Gary Claxton, Kaiser Family Found., The

Potential Side Effects of Halbig (July 31, 2014), http://kff.org/

health-reform/perspective/the-potential] -side-effects-of-halbig/.

* 26 U.S.C. § 5000A(e 1A).

° Levitt & Claxton, supra note 13.

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

Marketplace 2015 Open Enrollment Period: December Enrollment

(Continued on following page)

Premiums are “holding stable,” and “nearly 8 in 10

current consumers” can obtain monthly coverage “for

$100 or less after tax credits.”"

If the subsidies become unavailable in FFE

States, then 83% of those persons formerly eligible for

subsidies would “end up being exempt from the

individual mandate.”” Their unsubsidized premium

cost would become unaffordable—exceeding 8% of

their income. They and their families would go unin-

sured, taking cold comfort, perhaps, in knowing that

they will not have to pay a tax penalty. The rest

would be required to buy insurance at full cost,

without any subsidy, or pay a penalty for not doing so.

A recent study by researchers at the Urban

Institute predicts that the elimination of premium-

assistance tax credits in the 34 FFE States would

cause more than 9.3 million people to lose almost

$29 billion in subsidies—an average of $3,090 per

person—increasing the number of uninsured by about

8.2 million people.” Table 4 of the study,” reproduced

Report 7 (Dec. 30, 2014), http://aspe.hhs.gov/health/reports/2014/

MarketPlaceEnrollment/Dec2014/ib_2014Dec_enrollment. pdf.

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

Care Act is Working (last visited Jan. 28, 2015), http-/

www.hhs.gov/healthcare/facts/factsheets/201 4/10/affordable-care-

act-is-working. html.

" Levitt & Claxton, supra note 13.

* Linda J. Blumberg, Matthew Buettgens & John Holahan,

The Implications of a Supreme Court Finding for the Plaintiff in

King vs. Burwell: 8.2 Million More Uninsured and 35% Higher

(Continued on following page)

in part below, summarizes the impact in each FFE

State:

State Number Total Increase

of People | Value of in the

Losing Tax Number

Tax Credits & | of People

Credits {CSRs Lost/Uninsured

(Millions $)

[FFE] States! 9,346,000) 28,837.7| 8,151,000

abama 165,000 547.1 124,000

Alaska 42,000 232.8 34,000

Arizona 266,000 456.1 237 ,000

Arkansas 128,000 418.8 95,000

Delaware 28,000 92.4 24,000

Florida 1,184,000 3,891.4} 1,073,000

Georgia 461,000 1,524.9 435,000

Illinois 438,000 1,089.0 408,000

Indiana 225,000 924.5 195,000

lowa 98,000 289.2 90,000

Kansas 166,000 419.0 135,000

Louisiana 214,000 857.4 199,000

Maine 62,000 257.0 50,000

Michigan 321,000 905.8 277,000

Mississippi 147,000 568.0 137,000

Missouri 299,000 1,006.8 228,000

Premiums 5 (Jan. 2015), http://www.urban.org/UploadedPDF/

2000062-The-Implications-King-vs-Burwell. pdf.

Montana 70,000 192.3 61,000

Nebraska 97,000 282.3 83,000

New Hampshire 44,000 116.0 37,000

New Jersey 237,000 727.6 239,000

North Carolina 465,000 1,830.1 407,000

North Dakota 39,000 122.6 29,000

Ohio 497,000 1,510.1 459,000

Oklahoma 208,000 516.0 153,000

Pennsylvania 414,000 1,082.8, 329,000)

South Carolina 241,000 766.3 192,000

South Dakota 51,000 147.1 42,000

Tennessee 320,000 782.7 230,000

Texas 1.566,000 4,358.1; 1,441,000

Utah 162,000 361.6 97,000

irginia 321,000 1,071.4 280,000

West Virginia 41,000 146.3 49,000

Wisconsin 289,000 1,127.9 247,000

Wyoming 40,000 216.3 37,000

Il. Petitioners’ interpretation would destroy

State insurance markets and render the

ACA unworkable.

Withholding premium-assistance

would destabilize insurance markets and “effectively

destroy” the ACA, given the interrelatedness of the

individual mandate, the premium subsidies, and the

* King, 759 F.3d at 379 (Davis, J., concurring).

tax credits

guaranteed-issue/communky-rating provisions. Each

leg of the “three-legged stool” is vital.”

The critical function of the subsidies, in par-

ticular, led four Justices in NFIB to conclude that

insurance markets would not function properly

without them:

[The] system of incentives collapses if the

federal subsidies are invalidated. Without

the federal subsidies, individuals would lose

the main incentive to purchase insurance

inside the exchanges, and some insurers may

be unwilling to offer insurance inside of

exchanges. With fewer buyers and even

fewer sellers, the exchanges would not

operate as Congress intended and may not

operate at all.”

Indeed, “[t]he result could be what is commonly called

a ‘death spiral,’ as healthy people exit the market and

premiums rise even more.” Consistent with that pre-

diction, a recent RAND Corporation study concluded

that if subsidies are eliminated in FFE States, en-

rollments will decline by 9.6 million to 4.1 million,

a 70% decrease, and average premiums would

* Halbig, 758 F.3d at 418-22 (Edwards, J., dissenting).

*" 132 S.Ct. at 2674 (joint opinion of Scalia, Kennedy,

Thomas, and Alito, JJ., dissenting).

* Levitt & Claxton, supra note 13.

“ Christine Eibner & Evan Saltzman, RAND Corp.,

The Effect of Eliminating the Affordable Care Act’s Tax Credits

(Continued on following page)

increase by 47%.” That combination would “threat-

en|] the viability of the market.” The Urban Insti-

tute study reached comparable conclusions.”

According to Petitioners, those dire consequences

result by design from Congress’s use of “sticks” and

“carrots” to pressure States to create their own Ex-

changes and to deter them from relying on FFEs.” As

shown below, that reading is not only implausible—

it is foreclosed by the Pennhurst doctrine. Congress

did not give States clear notice that their citizens

would be punished and their insurance markets

ruined if the State chose an FFE. And constitutional-

avoidance principles likewise weigh heavily against

Petitioners’ interpretation because the use of such a

threat to pressure States into building their own

Exchanges would raise serious questions under the

Tenth Amendment.

in Federally Facilitated Marketplaces 5 (Jan. 2015),

http://www.rand.org/pubs/research_reports/RR980. html.

* Id.

" Td. at 6.

* Blumberg, Buettgens & Holahan, supra note 19, at 1

(predicting 8.2 million more uninsured people and 35% higher

premiums in FFE States).

* Pet’rs’ Br. 2-3.

iil. Petitioners’ interpretation of the ACA is

untenable under the Pennhurst doctrine

because Congress did not give the States

clear notice of the alleged consequences

of relying on a federally-facilitated Ex-

change.

A. The Pennhurst doctrine requires that

Congress give States clear notice of

conditions imposed under cooperative-

federalism programs.

When Congress enacts cooperative-federalism

programs, the States are entitled to clear notice about

the conditions to which they have agreed.” The Court

in Pennhurst State School & Hospital v. Halderman”’

described that clear-statement rule this way:

[Ljegislation enacted pursuant to the spend-

ing power is much in the nature of a con-

tract: in return for federal funds, the States

agree to comply with federally imposed

conditions. The legitimacy of Congress’ power

to legislate under the spending power thus

rests on whether the State voluntarily and

knowingly accepts the terms of the “con-

tract.” There can, of course, be no knowing

acceptance if a State is unaware of the condi-

tions or is unable to ascertain what is ex-

pected of it. Accordingly, if Congress intends

to impose a condition on the grant of federal

* NFIB, 132 S. Ct. at 2602, 2605-06.

" 451 U.S. 1(1981).

moneys, it must do so unambiguously. By

insisting that Congress speak with a clear

voice, we enable the States to exercise

their choice knowingly, cognizant of the con-

sequences of their participation.”

In 2006, in Arlington Central School District

Board of Education v. Murphy,” the Court applied

Pennhurst to conclude that expert-witness fees were

not recoverable by a prevailing party under the

Individuals with Disabilities Education Act.“ Writing

for the majority, Justice Alito explained that the

statute must be interpreted from “the perspective of a

state official who is engaged in the process of deciding

whether the State should accept [federal] funds and

the obligations that go with those funds.”” “We must

ask whether such a state official would clearly

understand that one of the obligations of the Act

is the obligation to compensate prevailing parents

for expert fees.”” In other words, “clear notice” is

required.”

The Court applied Pennhurst again in NFIB,

striking down the ACA’s provision that denied all

Medicaid funding to States that failed to adopt

Id. at 17 (citations and footnote omitted).

* 20 U.S.C. § 1415(iX3XB).

* 548 U.S. at 296 (emphasis added).

* Id. (emphasis added).

Medicaid expansion. Three Justices concluded that

the States lacked clear notice that participating in

the Medicaid program would subject them to such a

draconian, later-imposed condition.“ Chief Justice

Roberts wrote for the plurality that, while ““Congress’

power to legislate under the spending power is broad,

it does not include surprising participating States

with post-acceptance or ‘retroactive’ conditions.’””

Four other Justices agreed that the Pennhurst

principle applied to the ACA,” but they found the

Medicaid-expansion requirement unconstitutional

because it improperly coerced States into adopting a

federal program.”

Pennhurst’s clear-statement rule is critical to

cooperative federalism. In a cooperative-federalism

model, federal law establishes certain core require-

ments but gives States the freedom to decide whether

and how to implement their own programs within

those requirements. Cooperative federalism respects

State sovereignty by leaving to each State “the

ultimate decision” whether to accept the burdens and

benefits of the federal scheme.” Such local decision-

making promotes “greater citizen involvement in

* 132 S. Ct. at 2602-06 (plurality opinion by Roberts, C.J.,

joined by Breyer and Kagan, JJ.).

* Id. at 2606 (quoting Pennhurst, 451 U.S. at 25).

Alito, JJ., dissenting).

“ Td. at 2666.

“ New York v. United States, 505 U.S. 144, 168 (1992).

democratic processes” and the adoption of “policies

more sensitive to the diverse needs of a heterogene-

ous society.”” But the local deliberation promoted by

cooperative federalism is meaningless if the costs and

benefits of the States’ choices are not transparent.

Permitting hidden consequences to apply retro-

actively undermines a State’s ability to evaluate its

options realistically.

B. The States selected among Exchange

options without clear notice that the

choice could harm their citizens and

disrupt their insurance markets.

The ACA established a cooperative-federalism

model that promised “State Flexibility Relating to

Exchanges.™ Each State engaged in a careful and

thorough deliberative process to choose the Exchange

model best suited to its specific needs. That decision

was not lightly made. The States established commit-

tees and working groups to evaluate Exchange choices;

engaged with federal regulators to understand

the options; hired private consultants to provide

expert advice; solicited public input to understand

“ Bond v. United States, 131 S.Ct. 2355, 2364 (2011)

(quotation marks omitted).

“ 124 Stat. 120 (Title I, Subtitle D, part 3) (emphasis

added).

stakeholders’ views; and received grants to assist

with planning.”

While the extensive records of that deliberative

process show that the States relied on many factors

and came to diverse conclusions when selecting an

Exchange model, conspicuously absent is evidence

that States contemplated the dramatic consequence

of depriving their residents of tax credits or destroy-

ing their ow insurance markets. To the contrary,

States as diverse as Alaska,” Ohio,” and Delaware“

weighed the benefits and burdens without ever sug-

gesting that the ACA conditioned premium assistance

on a State’s creating its own Exchange. States

assumed that tax credits would be available without

“ Sarah Dash, et al., The Ctr. on Health Ins. Reforms,

Georgetown Univ. Health Policy Inst., Implementing the Afford-

able Care Act: State Decisions about Health Insurance Exchange

Establishment 2, 15-17 (Apr. 2013), https-//georgetown.box.com/

shared/static/pfmjd220fj03z7qes8w3. pdf.

“ Pub. Consulting Grp., Alaska Dep't of Health & Soc. Servs.

Health Ins. Exchange Planning, Final Report 40 (June 21, 2012),

http-//dhss.alaska.gov/Documents/Pdfs/AKHealthExchangeReport

2012. pdf (tax credits available in “all states”).

” Letter from Governor John R. Kasich to Dir. Gary Cohen,

CMMS (Nov. 12, 2012) (“Regardless of who runs the exchange,

the end product is the same.”), http://www.governor.ohio.gov/

Portals/0/pdf/11.16.12%20Letter%20to% 20HHS. pdf.

“ Amirah Ellis & Edward Ratledge, Univ. of Delaware,

Delaware and the Patient Protection Affordable Care Act 6-7

(updated Aug. 2011), http//dhss.delaware.gov/dhcc/files/issuebrief. pdf

(describing tax-credit availability irrespective of whether HHS

“fulfill[s/"Exchange requirement).

regard to which sovereign created the Exchange, as

reflected in reports issued in Illinois,” Oregon,” and

Washington.” And when the National Governors

Association published an Issue Brief in 2011 to assist

States in their deliberations, it did not mention that

tax credits might be unavailable in FFE States.”

The States that decided not to build their own

Exchanges did so for a variety of reasons. Many

determined that they could not complete an Exchange

within the tight federal deadlines, that there were too

many regulatory uncertainties, or that an FFE would

be a stepping stone to eventually creating a State-

based Exchange.” Others did so based on concerns

“ Health Mgmt. Assocs., Wakely Consulting Grp., Illinois

Exchange Strategic and Operational Needs Assessment, Final

Report 2, 11, 20 (Sept. 2011), http-/cgfa.ilga.gov/upload/final% 20i1%

20exchange% 20needs% 20assessment%20091511.pdf.

” Oregon Health Policy Bd., Building Oregon's Health

Insurance Exchange, A Report to the Oregon Legislature 3-5 (Dec.

2010), http://www.oregon.gov/oha/action-plan/exchange-report. pdf.

” Wash. H.B. Rep., SSB 5445, 2011 Session 2-3 (2011), http://

apps.leg.wa.gov/documents/billdocs/2011-12/Pdf/Bill% 20Reports/

House/5445-S%20HBR%20APH% 2011. pdf.

* Nat'l Governors Ass'n, State Perspectives on Insurance

Exchanges: Implementing Health Reform in an Uncertain

Environment (Sept. 16, 2011), http://www.nga.org/files/live/sites/

NGA/Sfiles/pdf/1109NGAEXCHANGESSUMMARY PDF.

* Dash, supra note 45, at 9-13; Robert Wood Johnson

Found., Health Policy Brief, Health Insurance Exchanges and

State Decisions 4-6 (July 18, 2013), http://www.rw3jf.org/content/

dam/farm/reports/issue_briefs/2013/rwjf407092.

about the cost or burden of operating their own

Exchange.”

Conspicuously absent from the Amici States’

deliberations was any notion that choosing an FFE

would deprive citizens of tax credits. For example:

* Virginia Governor Robert F. McDonnell’s

correspondence with Secretary Sebelius

memorialized Virginia’s understanding

“that the choice of a state based, federal,

or hybrid/partnership exchange are all

equally valid in complying with the

law.” Governor McDonnell emphasized

that Virginia was unaware of any “clear

benefits of a state run exchange to our

citizens.””

* New Hampshire enacted legislation that

assumed the availability of tax credits in

its federally-facilitated Exchange. The

statute created an advisory board whose

members must include a person “who

can reasonably be expected to purchase

individual coverage through the ex-

change with the assistance of a premium

tax credit.”

“ Dash, supra note 45, at 12-13.

“ Letter from Governor Robert F. McDonnell! to Sec’y

Kathleen Sebelius (Dec. 14, 2012), Va. Amicus Br. 25a, King v.

Burwell, 759 F.3d 358 (4th Cir. 2014) (No. 14-1158) (ECF No. 36-1).

* Id. at 26a.

* N.H. Rev. Stat. Ann. § 420-N:10(1Xh 1) (2014) (emphasis

added).

* Delaware Governor Jack Markell said

that, in selecting a partnership Exchange,

Delaware sought to “leverage a shared

federal infrastructure, retain manage-

ment of critical areas most directly

impacting Delawareans, and ensure

financial viability in light of the size of

our population and market.”” The goal

was “to ensure access to quality afforda-

ble health care for all Delawareans.””

As the governor’s advisor testified before

Congress, Delaware chose the partner-

ship model believing that it would pro-

vide health insurance to a “significant

number” of uninsured Delawareans,

including by providing them “subsidies

through the exchange.””

* [llinois Governor Pat Quinn said that

Illinois opted for a federal partnership

exchange “to increase access to quality

health care and improve the health

of the people of [llinois,” noting that

“ Letter from Governor Jack A. Markell to Sec’y Kathleen

Sebelius (Nov. 14, 2012), https://www.cms.gov/CCIIO/Resources/

Technica!-Implementation-Letters/Downloads/de-exchange-letter.

pdf.

Before the Sen. Comm. on Fin., 113th Cong. 35 (2013) (statement

of Bettina Tweardy Riveros, Advisor to the Governor and Chair

of the Delaware Health Care Commission).

Iilinoisans “deserve ail the benefits

afforded to them” under the ACA.”

The deliberations of the Amici States that

decided to create their own Exchanges make equally

clear that their decisions were not based on tax-credit

availability. If Petitioners were right, depriving citi-

zens of tax credits would have been the overwhelming

factor warranting a State-based Exchange. But the

States instead mentioned other reasons for their deci-

sion. Many wished to retain control over their own

Exchanges, thereby allowing them to tailor the Ex-

change to regional and local concerns. For instance:

* New York Governor Andrew M. Cuomo

explained that New York would be “best

positioned” to “understand the ramifica-

tions of operating an Exchange within”

the State’s insurance markets and to

“consider the unique regional and eco-

nomic needs” of New Yorkers;

¢ Rhode Island Governor Lincoln D. Chafee

likewise explained that building an Ex-

change would allow Rhode Island to

“ Letter from Governor Pat Quinn to Gary Cohen, Acting

Dir.. CMMS (Oct. 16, 2012) (emphasis added), https://www.

ems.gov/CCIIO/Resources/Technical-Implementation-Letters/

Downloads/il-exchange-letter. pdf.

” Exec. Order (Cuomo) No. 42, 9 N.Y.C.R.R. § 8.42 (N.Y.

2012).

maintain “regulatory authority over [its]

commercial health insurance market”;

* The Idaho legislature found that “a

state-based health insurance exchange

will provide an Idaho-specific solution

that fits the unique needs of the state of

Idaho”;™ and

* Kentucky Governor Steven L. Beshear

issued an executive order noting that

the fundamental obligations of an

Exchange— including “l|e)nabling eligible

individuals to receive premium tax

credits”—-were the same in “every state

in America,” but finding that a State-

based Exchange would best meet Ken-

tucky’s “unique regional and economic

needs.”

Some States also found that a State-based Exchange

would provide the best system for coordinating with

their preexisting State healthcare programs, 938 in

Kentucky” and Hawaii.” Several Amici States also

“ Exec. Order (Chafee) No. 11-09 (R.1. 2011), http://www.

healthcare.ri.gov/documents/Exec% 200rder% 20 11-09% 20as% 20

Signed. pdf.

“ Idaho Code Ann. § 41-6102 (West 2014).

* Exec. Order (Beshear) No. 2012-587, at 1 (Ky. 2012),

http-//apps.sos. ky.gov/Executive/Journal/execjournalimages/2012

-MISC-2012-0587-222943. pdf.

“ Id. at 2.

“ 2011 Haw. Sess. Laws, Act 205, § 2.

cited the substantial financial incentives that Con-

gress expressly provided to help them build their own

Exchanges.” Indeed, as of October 2014, the States

had received more than $4.8 billion in such funding.”

These States at no point suggested that they

were building their own Exchanges so their citizens

could enjoy the far more substantial benefits provided

by premium-assistance tax credits. The opposite is

true. For instance, the Washington State Health Care

Authority explained that tax credits would “accrue to

every state regardless of how the state implements an

Exchange.””'

Against all of this evidence, Oklahoma, together

with Alabama, Georgia, Nebraska, and South Carolina,

assert that “[iJn making their Exchange-establishing

decisions, the States were well aware that the plain

text of Section 36B conditioned the availability of tax

credits on States establishing exchanges.”” But the

” Eg., Ins. and Real Estate Comm., Joint Favorable Report

1-2 (Ct. Mar. 15, 2011), ftp://ftp.cga.ct.gov/2011/JFR/S/2011SB-

00921-ROOINS-JFR.htm.

* Annie L. Mach & C. Stephen Redhead, Cong. Research

Serv., R43066, Federal Funding for Health Insurance Exchanges

2 (2014), http://fas.org/sgp/crs/misc/R43066. pdf.

" Washington Health Care Auth., Washington State Health

Benefit Exchange Program, Issue Brief #1: Goals and Value of

a Health Benefit Exchange 2 (Jan. 1, 2011) (emphasis added),

http://wahbexchange.org/wp-content/uploads/HBE_Planning Grant_

Goal_pdf.

™ Okla. Amicus Br. 15.

brief cites no evidence for that ipse dixit. Indeed, the

facts appear otherwise.

In Nebraska, Governor Dave Heineman explained

in November 2012 that the State had declined to

create an Exchange due to its high cost.” But he

insisted that the choice would have no adverse affect

on Nebraskans. “On the key issues,” he said, “there is

no real operational difference between a federal

exchange and a state exchange.”

The Georgia Health Insurance Exchange Advisory

Committee advised Governor Nathan Deal that

“Georgians will be eligible for these subsidies whether

the AHBE [American Health Benefit Exchange] in

Georgia is established by the state or federal govern-

ment.” So when Governor Deal announced that

Georgia would not create a State-based Exchange, his

stated reason disclosed no awareness that it would

deprive Georgians of millions of dollars in tax credits;

instead, he objected to “Obamacare’s one-size fits all

™® Joanne Young, Heineman opts for federal health care

exchange, Lincoln Journal Star (Nov. 15, 2012), http://

journalstar.com/news/state-and-regional/statehouse/heineman-

opts-for-federal-health-care-exchange/article_c8b80018-c57b-52c7-

807c-807535e3533a.html.

ai |

™ Georgia Health Ins. Exchange Advisory Comm., Report

to the Governor 13 (Dec. 15, 2011) (emphasis added),

https://www.statereforum.org/system/files/179765813ghix_final_

report_to_the_governor. pdf.

approach and the high cost that the law places on

states.””

The rejection of a State-based Exchange by the

Governors of both Alabama” and South Carolina”

similarly referenced opposition to the ACA, and to the

costs imposed on States, but disclosed no awareness

that State citizens would also forfeit billions in

tax-credit dollars. In fact, South Carolina’s Health

Planning Committee assumed that there was no

difference in tax-credit availability,” and Governor

Haley thereafter described Congress’s incentive for

State-created Exchanges to be the “outrageously large”

financial “grants” to assist States in establishing

them, not the availability of tax credits.” She wrote

* Press Release, Office of the Governor, Deal: Georgia will

not set up state exchange (Nov. 16, 2012), http://gov.georgia.gov/

press-releases/2012-11-16/deal-georgia-will-not-set-state-exchange.

“ Press Release, Office of Alabama Governor Robert J.

Bentley, Governor Bentley Announces Alabama Will Not Set Up

State Insurance Exchange (Nov. 13, 2012), http://governor.alabama.

gov/newsroom/2012/11/governor-bentley-announces-alabama-will-

not-set-up-state-insurance-exchange/.

" Letter from South Carolina Governor Nikki R. Haley to

Senator Jim DeMint (July 2, 2012), http://governor.sc.gov/

Documents/Letter% 20to% 20Senator%20DeMint. pdf.

* South Carolina Health Planning Comm., Improving the

Health Care Marketplace in South Carolina 17 (Nov. 2011),

http///doi.sc.gov/DocumentCenter/View/2534 (“if a state chooses

not to create its own exchange, the federal government will

operate one in that state” and “exchanges will provide .

premium and cost-sharing subsidies”).

” Letter from Governor Haley, supra note 78, at 1.

that “[bly refusing to implement state-based ex-

changes, the state is ceding nothing . ™

And in West Virginia, State officials answered

“yes” in June 2012 to the question “Will individuals

who are enrolled in coverage through a Federally-

facilitated Exchange have access to premium tax

credits Contemporary news accounts sur-

rounding West Virginia’s decision to forgo a State-

based exchange in favor of an FFE made no mention

that tax credits were available through one but not

the other.”

Oklahoma alone can genuinely claim to be

differently situated. In September 2012, after NFIB

was decided, Attorney General Pruitt added a claim

to Oklahoma’s then-pending lawsuit to argue that

the IRS Rule was impermissible.“ Two months later,

Governor Mary Fallin announced that Oklahoma

would not pursue a State-based Exchange and

that she supported General Pruitt’s “ongoing legal

* 2228.

“ WV Health Benefits Exchange Stakeholder Meeting

Summary 3 (May 9, 2012), http://bewv.wvinsurance.gov/Portals/

2/pdf/CarrierNotesMay2012. pdf.

“ Eric Eyre, W.Va. and feds to share health insurance

exchange, W. Va. Gazette (Dec. 10, 2012), http://www.wvgazette.

com/News/201212100096.

“ Am. Compl. 4 11, Oklahoma ex rel. Pruitt v. Burwell, No.

6:11-cv-00030-RAW (E_D. Okla. Sept. 19, 2012) (ECF No. 35).

challenge.” Yet even Oklahoma’s position is not

without contradiction, as the State has continued to

advise eligible Oklahomans that they “qualify for the

federal Health Insurance Marketplace and related

advance premium tax credits.”™

In any event, the fact that some Oklahoma

officials adopted an unusual litigating position in

September 2012 does not demonstrate that the ACA

provided Pennhurst’s objectively “clear notice” when it

was enacted in 2010. Nor does Oklahoma's legal

position show that Officials in other States made their

Exchange-election decisions with knowledge that tax

credits would be unavailable.

To the contrary, the evidence marshaled above,

and by others,” shows that Amici States here, and

officials in nearly every State, lacked any notice, let

alone clear notice, that adopting an FFE would

" See Press Release, Governor Mary Fallin, Gov. Fallin:

Oklahoma Will Not Pursue a State-Based Exchange or Medicaid

Expansion (Nov. 19, 2012), http://www.ok.gov/triton/modules/

newsroom/newsroom_article.php?id=223&article_id=9750.

“ See Press Release, Governor Mary Fallin, Governor Fallin

Announces Extension of Insure Oklahoma (Sept. 6, 2013),

http//www.ok.gov/triton/modules/newsroom/newsroom_article.php?

id=223&article_id=12653 (emphasis added).

“ See also Christine Monahan, Halbig v. Sebelius and State

Motivations to Opt for Federally Run Exchanges, Ctr. on Health

Ins. Reforms (Feb. 11, 2014), http://chirblog.org/halbig-v-sebelius-

and-state-motivations-to-opt-for-federally-run-exchanges/ (finding

little evidence that tax-credit availability played a role in States’

decisions to create a State-based Exchange).

deprive citizens of billions in subsidies and destabi-

lize State insurance markets.”

C. The States had no clear notice from

the text, structure, purpose or history

of the ACA that citizens in FFE States

would be denied premium-assistance

tax credits.

From “the perspective of a state official,”” there

was nothing in the text, structure, purpose or history

of the ACA to give them clear notice of Petitioners’

interpretation. The ACA is one of the most elaborate

statutory programs ever devised. It comprises “10

“ Two of Petitioner: amici search for States that might

have made their Exchange-election decisions based on the legal

issue here. Mo. Liberty Project Amicus Br. 15-20; Galen Inst.

Amicus Br. 13-14. Their citation of New Hampshire is clearly

wrong, given that the legislature there required that a New

Hampshire citizen who receives “a premium tax credit” serve on

the State’s advisory board. See note 57 supra and accompanying

text. Their other examples are also based on speculative and

unreliable evidence. For instance, the Missouri Project cites a

recent article in which Petitioners’ amicus, Michae] Cannon,

claims credit for influencing Maine’s decision, although the

article’s author himself concluded from State records that “{iJt’s

unclear from the documents whether the LePage administration

anticipated .. the court case that challenges the legality of

premium subsidies in the federal exchange.” Steve Mistler,

Outspoken critic of Obamacare helped to turn LePage against

state exchange, Portland Press Herald (Nov. 23, 2014), http://

www.pressherald.com/2014/11/23/outspoken-critic-of-obamacare-

helped-to-turn-lepage-against-state-exchange/.

* Arlington Cent., 548 U.S. at 296.

titles stretch[ing] over 900 pages and contain[ing]

hundreds of provisions.””

Under Petitioners’ interpretation, the provision

barring federal subsidies in FFE States is buried in

two sub-subsections of 26 U.S.C. § 36B. The phrase

“an Exchange established by the State under

{§) 1311” appears in the provision describing part of

the calculation of an _ individual tax credit

(§ 36B(b\2XA)), and again in the definition of “cover-

age month” (§ 36B(c)2)(A)). Petitioners infer from

that usage that Congress intended to deny tax credits

to citizens in FFE States in order to pressure States

to build their own Exchanges.

But those isolated phrases fail Pennhurst’s

clear-notice test. For starters, Congress does not

“hide elephants in mouseholes.”™ It is unreasonable

to expect State officials to have found clear notice

of Congress’s supposed threat in obscure sub-

subsections of the tax code pertaining to the calcula-

tion of an individual’s tax credit.

What is more, by focusing narrowly on the

phrase “created by the State,” Petitioners violate the

whole-text canon, perhaps the most common mistake

made when interpreting a statute.” “Over and over,”

” NFIB, 132 S. Ct. at 2580.

*" Whitman v. Am. Trucking Ass'ns, 531 U.S. 457, 468

(2001).

™ See Antonin Scalia & Bryan A. Garner, Reading Law:

The Interpretation of Legal Texts 167 (2012) (“Perhaps no

(Continued on following page)

this Court has “stressed that ‘liJn expounding a

statute, we must not be guided by a single sentence or

member of a sentence, but look to the provisions of the

whole law, and to its object and policy.’”” Even when

a particular reading of a sentence in one section may

be “the most natural reading .. when viewed in

isolation, statutory language must always be read

in its proper context look[ing] to the particular

statutory language at issue, as well as the language

and design of the statute as a whole.™ Thus, “a court

should not interpret each word in a statute with

blinders on, refusing to look at the word’s function

within the broader statutory context.””

In this case, although the two occurrences of

“established by the State” in § 36B could be read in

isolation to support Petitioners’ view, “all of the other

evidence from the statute points the other way.””

Within § 36B itself, subsection (a}—which establishes

the right to tax credits—authorizes tax credits for

“applicable taxpayer[s],” a term whose definition does

not turn on whether the taxpayer’s own State has

interpretive fault is more common than the failure to follow the

whole-text canon... .”).

439, 455 (1993) (quoting United States v. Heirs of Boisdore, 49

U.S. 113, 122 (1849)) (emphasis added).

“ McCarthy v. Bronson, 500 U.S. 136, 139 (1991).

* Abramski v. United States, 134 S.Ct. 2259, 2267 n.6

(2014).

* U.S. Nat'l Bank, 508 U.S. at 455.

itself set up the Exchange. Other provisions of § 36B

addressing the tax-credit calculation use the term

“Exchange” by itself.” State officials reviewing § 36B

therefore would have had no sensible reason to con-

clude, let alone clear notice, that the two occurrences

of “established by the State” had the far-reaching

effect Petitioners assert.

And even if State officials had zeroed in on the

phrase “Exchange established by the State under

§ 1311”—“the way Waldo’s whereabouts” are revealed

when flagged with a highlighter’—they would still

have to look up the meaning of the defined-and-

capitalized term “Exchange,” and then look at § 1311

(42 U.S.C. § 18031) to see what that section says

about it. So the language in § 36B “merely raises,

rather than answers, the critical question . ™ “In

answering that inquiry, we must (as usual) interpret

the relevant words not in a vacuum, but with re’er-

ence to the statutory context, structure, history, and

purpose,. nottomentioncommonsense . .””

* See 26 U.S.C. § 36B(dX3XB), (eX3), (£3).

“ Vikram David Amar, Why the Federalism Teachings from

the 2012 Obamacare Case Weaken the Challengers’ Case in King

v. Burwell, Verdict (Dec. 5, 2014), http://verdict.justia.com/

2014/12/05/federalism-teachings-2012-obamacare-case-weaken-

challengers-case-king-v-burwell.

” Abramski, 134 S. Ct. at 2267.

'” Id. (quotations omitted).

Section 1311 provides that “Each State shall, not

later than January 1, 2014, establish an American

Health Benefit Exchange (referred to in this title as

an ‘Exchange’).””’ Congress provided financial assis-

tance to help States do so.” But what if a State did

not want to build an Exchange or would not have it

operational by 2014? Section 1321(c) (42 U.S.C.

§ 18041(c)) took care of that: the Secretary shall

“establish and operate such Exchange within the

State.”

So is a federally-facilitated Exchange (“such

Exchange”) the same, for purposes of the ACA, as an

Exchange “established by the State”? Yes, because the

word “Exchange” is a defined term of art, and the

only kind of Exchange defined in the ACA is an

Exchange established by the State under § 1311.

“Exchange” is,defined in 42 U.S.C. § 300gg-

91(d)(21) as “an American Health Benefit Exchange

established under section 18031 [ACA § 1311] of chis

title.” There is no other definition of “Exchange” and

no separate definition of an Exchange established

by the Secretary. Section 18031(d) repeats the

point by making it a general requirement that an

Exchange “shall be a governmental agency or non-

profit entity that is established by a State.” And the

' 42 U.S.C. § 18031(bx 1).

' 42 U.S.C. § 18031(a).

42 U.S.C. § 18041(cX 1) (emphasis added).

™ 42 U.S.C. § 18031(d\(1) (emphasis added).

defined-and-capitalized term “Exchange” is then used

throughout the ACA, including in the tax-credit

provisions in § 36B.

Returning to § 18041(cX1), the “such Exchange”

that the Secretary establishes (when the State does

not) is properly treated as the “Exchange established

by the State under § 1311.” That is so because there

is no other Exchange defined in the ACA that it could

be. Indeed, officials in various States repeatedly

noted that the Exchange would be legally the same

regardless of which sovereign created it." As Mary-

land’s agency put it: “The ACA provides that all states

must either create their own health benefit exchanges

or allow the federal government to do it for them.”

Petitioners pay scant attention to the ACA’s

statutory definition, relying instead on a colloquial

understanding of “Exchange established by the State”

in § 36B(bX2KA) and (c)2A\1). But the statutory

definition is essential, for the definition Congress

assigns is “assuredly dispositive” of its scope

“for purposes of matters that are within Congress’

' E.g., Exec. Order (Chafee), supra note 63, at 1 (“if a state

does not elect to establish an Exchange, [HHS] shall establish

and operate such Exchange within the state”); Wash. H.B. Rep.,

SSB 5445, supra note 51, at 2 (“If a state chooses not to establish

an AHBE, the federal government will operate an AHBE.”).

'“ Maryland Health Care Reform Coordinating Council,

Final Report and Recommendations 14 (Jan. 1, 2011), http-//

marylandhbe.com/wp-content/uploads/2012/10/HCRCC-FINAL

REPORT_jan20111. pdf.

control.” Thus, the Court in NFIB found that the

individual mandate was not a “tax” for purposes of

the Anti-Injunction Act because Congress called it a

“penalty,” even though the constitutionality of the

individual mandate depended on its characterization

as a “tax” for constitutional purposes.” Congress can

likewise say that “such Exchange” established by the

Secretary counts as the Exchange established by the

State in discharge of its obligation to create one

under § 18031.

The ACA may not be “a chef d’oeuvre of legisia-

tive draftsmanship. But we must do our best,

bearing in mind the fundamental canon of statutory

construction that the words of a statute must be read

in their context and with a view to their place in the

overall statutory scheme.”

Under the whole-text canon, moreover, other

provisions of the ACA confirm that Petitioners’ read-

ing is untenable. For example, § 18083 directs the

Secretary to ensure that residents of “each State”

may enrol] in an Exchange in a manner that gives

them access to premium-assistance tax credits.

Subsection (a) requires the Secretary to “establish a

system . under which residents of each State may

'” Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374, 392

(1995).

™ See NFIB, 132 S. Ct. at 2583, 2594.

‘ Util. Air Regulatory Grp. v. EPA, 134 S. Ct. 2427, 2441

(2014) (citation and quotation omitted).

apply for enrollment in, receive a determination of

eligibility for participation in, and continue participa-

tion in, applicable State health subsidy programs.”’”

Subsection (e) defines “applicable State health subsi-

dy programs” as “including the premium tax credits

under section 36B of title 26.” Thus, section 18083

shows that Congress intended for tax credits to be

available in “each State.”

The ACA also defines a “qualified individual” who

can enroll in an Exchange as “an individual who

resides in the State that established the Exchange.”’”

If Petitioners’ theory were applied to that section, no

one would be eligible to enroll in a federally-

facilitated Exchange because it would not be an

Exchange that the State itself has established. That

reading makes no sense and would violate the pre-

sumption against ineffectiveness.’ By contrast,

reading “Exchange” as a single defined term—an

American Health Benefit Exchange that the State is

required to establish, whether by doing so itself or by

letting the Secretary establish “such Exchange within

the State” on its behalf—resolves the conundrum

throughout the ACA.

" 42 U.S.C. § 18083(a) (emphasis added).

™ Id. § 18083(eX 1).

'* 42 U.S.C. § 18032(fX 1A) (emphasis added).

'" Scalia & Garner, supra note 92, at 63.

™* 42 U.S.C. § 18041(cX1).

The ACA’s Medicaid maintenance-of-effort provi-

sion would also become dysfunctional in Petitioners’

world. That provision states that until “the date on

which the Secretary determines that an Exchange

established by the State under section 18031 of this

title is fully operational,” the State cannot make its

Medicaid-eligibility standards “more restrictive” than

those in effect on March 23, 2010.’ Under Petition-

ers’ interpretation, FFE States would never come into

compliance and would have their Medicaid-eligibility

standards frozen indefinitely. Ironically, the FFE

States that have applied for and received approval of

more restrictive Medicaid-eligibility standards in-

clude three of Petitioners’ amici—Oklahoma, Indiana,

and Nebraska.’ Indiana has even used tax-credit

availability as one of the justifications for its waiver

request.’ Other FFE States have likewise submitted

waiver applications to HHS that assume the availa-

bility of tax credits, such as Arkansas,'" Iowa,’”

'® 42 U.S.C. § 1396a(ggX 1) (emphasis added).

" Resp'ts’ Br. 29.

‘" Indiana Family & Soc. Servs. Admin., Healthy Indiana

Plan 1115 Waiver Extension Application 29, 44 (Apr. 12, 2013),

Indiana v. I.R.S., No. 1:13-cv-01612 (S.D. Ind. Apr. 16, 2014),

ECF No. 61-11.

'™* Arkansas Medicaid, Proposed Amendment to Health Care

Independence (aka Private Option) 1115 Waiver 3, https://www.

medicaid. state.ar.us/general/comment/demowaivers.aspx.

"* lowa Dep’t of Human Servs., Jowa Wellness Plan 1115

Waiver Application 8, ‘.1, 29, 49 (Aug. 2013), http://dhs.iowa.gov/

sites/default/files/LAWeilnessPlan1115_Final.pdf.; Jowa Marketplace

(Continued on following page)

Pennsylvania,” and Tennessee.” That practical con-

struction further confirms that “Exchange established

by the State” means the defined Exchange estab-

lished under § 1311, regardless of whether the State

itself establishes it or the Secretary establishes “such

Exchange” on the State’s behalf.

Finally, the Petitioners’ theory would make

surplusage of the reporting requirements in § 36B(f).

That section requires all Exchanges to report to the

Secretary six categories of information (subsections

A-F) for each health plan purchased. Four of the six

involve tax-credit information: (B), the “total premi-

um for the coverage without regard to the credit”; (C),

the “aggregate amount of any advance payment of

such credit”; (E), “[aJny information provided to the

Exchange . necessary to determine eligibility for,

and the amount of, such credit”; and (F), “information

necessary to determine whether a taxpayer has

received excess advance payments.” That reporting

requirement would make little sense if credits were

unavailable in FFE States.

Choice Plan 1115 Waiver Application 3, http://dhs.iowa.gov/

sites/default/files/LAMktplaceChoice 1115_Final. pdf.

’ Pennsylvania Dep't of Pub. Welfare, Healthy Pennsylvania

1115 Demonstration Application 10-12 (Feb. 2014), http://www.

dpw.state. pa.us/cs/groups/webcontent/documents/document/c_

071204. pdf.

'* Insure Tennessee, Waiver Amendment Request, TennCare,

Demonstration Amendment #25 1, https://news.tn.gov/sites/default/

files/Insure®20Tennessee%20-%20 Waiver%20Amendment. pdf.

'™ 26 U.S.C. § 36B(fX3XB), (C), (E), (F).

Petitioners’ construction also undermines the

clear purpose of the ACA as reflected in its statutory

text and structure: to provide affordable health

insurance to as many Americans as possible. The

requirement in § 18083(a) to ensure enrollees’ ability

to qualify for tax credits in “each State” is but one

example. More broadly, the title in which § 36B

appears is called “Quality, Affordable Health Care for

All Americans.” The subtitle is “Affordable Cover-

age Choices for All Americans.” Congress’s choice of

the word “all” confirms that the phrase Petitioners

pluck from § 36B was not meant to deny affordable

health coverage in FFE States and to destroy State

insurance markets.

Although the court of appeals found the ACA’s

legislative history “not particularly illuminating on

the issue of tax credits,” to the States’ ears, Con-

gress spoke loudly and one-sidedly to the point at

issue here:

e Senator Baucus said “tax credits will

help to ensure a/l Americans can afford

quality health insurance.”"”

¢ Senator Johnson said the ACA will “form

health insurance exchanges in every

State through which those limited to the

'* 124 Stat. 130 (emphasis added).

™ 124 Stat. 213 (emphasis added).

’ King, 759 F.3d at 371.

'* 155 Cong. Rec. $11,964 (Nov. 21, 2009) (emphasis added).

individual market will have access to

affordable and meaningful coverage.”

* Senator Durbin said “we will help you

pay your health insurance premiums,

give you tax breaks to pay those premi-

ums. That means a lot of people who

today cannot afford to pay for health

insurance premiums will be able to.””

He added that “30 million Americans

today who have no health insurance

will qualify for . tax credits to help

them pay their premiums so they can

have and afford health insurance.”

e Senator Bingaman said that the ACA

“includes creation of a new health insur-

ance exchange in each State which will

provide Americans. meaningful private

insurance as well as refundable tax

credits to ensure that coverage is afford-

able.”"”

One of the ACA’s staunchest opponents, Representa-

tive Paul Ryan, criticized the law because it made tax

credits available in every State:

[I]t’s a new, open-ended entitlement that

basically says that just about everybody

in this country—people making less than

‘*" 155 Cong. Rec. $13,375 (Dec. 17, 2009) (emphasis added).

‘* 155 Cong. Rec. S12,779 (Dec. 9, 2009).

™ 155 Cong. Rec. $13,559 (Dec. 20, 2009) (emphasis added).

‘ 155 Cong. Rec. $12,358 (Dec. 4, 2009) (emphasis added).

$100,000, you know what, if your health care

expenses exceed anywhere from 2 to 9.8

percent of your adjusted gross income, don’t

worry about it, taxpayers got you covered,

the government is going to subsidize the

rest.”

As the States watched and listened o those

debates, none of those statements would have made

sense had Congress intended to withhold tax credits

in FFE States. Tellingly, even Petitioners’ amici—

Jonathan Adler and Michael Cannon, the two con-

servative commentators who later published the

roadmap for Petitioners’ legal challenge—admitted

that they “were both surprised to discover this feature

of the law and initially characterized it as a

‘glitch.’”" Judge Edwards of the D.C. Circuit put it

more cynically: Petitioners’ “incentive story is a

fiction, a post hoc narrative concocted to provide a

colorable explanation for the otherwise risible notion

that Congress would have wanted insurance markets

to collapse in States that elected not to create their

own Exchanges.”

™ Verbatim Transcript, Markup of the Reconciliation Act of

2010, H. Comm. on Budget, 111th Cong., 2010 WL 941012 (Mar.

15, 2010) (emphasis added).

'™ Jonathan H. Adler & Michael F. Cannon, Taxation

Without Representation: The Illegal IRS Rule To Expand Tax

Credits Under the PPACA, 23 Health Matrix 119, 123 (2013)

(emphasis added).

' Halbig, 758 F.3d at 416 (Edwards, J., dissenting).

From the States’ perspective, then, not only was

there no “clear notice” that opting for a federally-

facilitated Exchange would deny citizens tax credits

and ruin insurance markets, but a chorus of congres-

sional leaders uniformly signaled the opposite. Con-

gress promised a cooperative-federalism model, one

promoting “State Flexibility Relating to Exchang-

es,” not a model based on federal threats and coer-

cion. Indeed, the most significant aspect of the

legislative history is the absence of any evidence

supporting Petitioners’ interpretation.

“Congress’ silence in this regard can be likened to

the dog that did not bark,” from which Sherlock

Holmes deduced that the perpetrator must have been

known to the dog.” If anyone in Congress had actually

proposed coercing the States in the manner claimed

by Petitioners, it would have engendered howls of

protest from the ACA’s opponents and from those who

normally resist efforts by the federal government to

impose undue pressure on the States. Yet there was

not so much as a growl of disapproval about the

iniquitous scheme Petitioners postulate here.

The best that Petitioners and their amici come

up with are YouTube videos of Professor Jonathan

™ 124 Stat. 120 (Title 1, Subtitle D, part 3) (emphasis

added).

‘ Chisom v. Roemer, 501 U.S. 380, 396 n.23 (1991).

'“ Id. (citing A. Doyle, Silver Blaze, in The Complete

Sherlock Holmes 335 (1927)).

Gruber, a private citizen appearing at non-

governmental meetings years after the ACA was

enacted.” But they fail to demonstrate that Professor

Gruber’s message was disseminated to the State

officials responsible for determining whether to build

their own Exchange. In any event, Gruber later cor-

rected himself, calling his earlier statements a mis-

take’ and pointing out that his own economic

simulations “expressly modeled for the citizens of

all states to be eligible for tax credits, whether

served directly by a state exchange or by a federal

exchange.”

Judge Edwards was correct in Halbig v. Burwell

that the ACA provided no “notice to States that their

taxpayers will be denied subsidies if the State elects

to have HHS create an Exchange on its behalf.”

If that consequence could not be discerned by the

'" See, e.g., Pet'rs’ Br. 4-., 42-43; Sen. Cornyn Amicus Br.

13-14; Mountain States Legal Found. Amicus Br. 10.

‘* Jonathan Cohn, Jonathan Gruber: ‘It Was Just a Mistake,

An Obamacare architect explains a 2012 quote that’s fueling

critics, New Republic (July 25, 2014), http://www.newrepublic.

com/article/118851/jonathan-gruber-halbig-says-quote-exchanges-

was-mistake.

'* Written Testimony of Professor Jonathan Gruber before

the Comm. on Oversight & Gov't Reform, U.S. House of Repre-

sentatives 2 (Dec. 9, 2014) (emphasis added), http://oversight.

house.gov/wp-content/uploads/2014/12/Gruber-Statement-12-9-

ObamaCare1.pdf.

'® 758 F.3d at 421 (Edwards, J., dissenting).

federal district judge in this case,’ nor by the one in

Halbig,"” nor by (now) four federal circuit judges,

how could the States have been on “clear notice”?

IV. The constitutional-doubt canon also coun-

sels against Petitioners’ ACA interpretation,

which raises serious questions under the

Tenth Amendment.

“A statute should be interpreted in a way that

avoids placing its constitutionality in doubt.” The

constitutional-doubt canon “militates against not only

those interpretations that would render the statute

unconstitutional but also those that would even raise

serious questions of constitutionality.”“” Because

Petitioners’ interpretation would raise a very serious

‘" King v. Sebelius, 997 F. Supp. 2d 415, 427-32 (E.D. Va.

2014) (Spencer, J.), aff'd sub nom. King v. Burwell, 759 F.3d 358

(4th Cir. 2014).

‘® Halbig v. Sebelius, No. CV 13-0623 (PLF), 2014 WL

129023, at *18 (D.D.C. Jan. 15, 2014) (Friedman, J.), rev'd and

remanded sub nom. Halbig v. Burwell, 758 F.3d 390 (D.C. Cir.

2014), reh’g en banc granted, judgment vacated, No. 14-5018,

2014 WL 4627181 (D.C. Cir. Sept. 4, 2014).

'* King, 759 F.3d at 372-73 (Gregory, J., joined by Thacker,

J.); id. at 376 (Davis, J., concurring); Halbig, 758 F.3d at 426

(Edwards, J., dissenting).

‘“ Scalia & Garner, supra note 92, at 247 (citing United

States ex rel. Att’y Gen. v. Del. & Hudson Co., 213 U.S. 366, 408

(1909)).

* Id. at 247-48 (citing Crowell v. Benson, 285 U.S. 22, 62

(1932)).

constitutional question under the Tenth Amendment,

their reading of the ACA should be rejected.

In New York v. United States“ and Printz v. United

States,’ this Court recounted the Framers’ choice to

adopt a federal system that operates without coercing

States into implementing federal programs. In NFIB,

the Court explained that cutting off all Medicaid

funding to States that declined Medicaid expansion

constituted “much more than relatively mild encour-

agement—it is a gun to the head.” It “‘crossed the

line distinguishing encouragement from coercion,’”’”

serving “no purpose other than to force unwilling

States” to comply.”

In the court of appeals, Petitioners argued that

the scheme they attribute to Congress was “the same”

in its coercive nature as one invalidated in NFIB.™'

In this Court, Petitioners prefer understatement,

saying that “Congress could quite reasonably believe

that elected state officials would not want to explain

to voters that they had deprived them of billions of

‘ 505 U.S. at 164-66.

“" 521 U.S. 898, 919-22 (1997).

‘“ 132 S. Ct. at 2604 (plurality) (quotation omitted); see also

id. at 2659-66 (joint opinion of Scalia, Kennedy, Thomas, and

Alito, JJ., dissenting) (agreeing mechanism was coercive).

‘* Id. at 2603 (plurality) (quoting New York, 505 U.S. at

175).

~ oe.

‘* Appellants’ Opening Br. 44, King v. Sebelius, 759 F.3d

358, 375 (4th Cir. 2014) (No. 14-1158), ECF No. 14.

dollars by failing to establish an Exchange.””” Either

way, it is a novel kind of pressure to threaten to

injure a State’s citizens and to destroy its insurance

markets in order to force State-government officials

to implement a federal program.

This Court recently said in Bond v. United States

that “if the Federal Government would radically

readjust| ] the balance of state and national authority,

those charged with the duty of legislating [must be]

reasonably explicit about it.”"” As in Bond, Congress

was not “utterly clear” about that here. And because

Petitioners’ interpretation of the ACA would raise

a serious Tenth Amendment question, it must be

rejected in favor of the Government’s more plausible

reading, which avoids that infirmity.

'% Pet’rs’ Br. 32.

“° 134 S. Ct. 2077, 2089 (2014) (quotations omitted).

'™ Td. at 2093.

CONCLUSION

The judgment of the court of appeals should be

affirmed.

Respectfully submitted,

MARK R. HERRING

Attorney Genera] of Virginia

CYNTHIA BAILEY

Deputy Attorney General

KIM PINER

Senior Assistant Attorney

General

CARLY L. RUSH

Assistant Attorney General

January 28, 2015

STUART A. RAPHAEL*

Solicitor General of Virginia

TREVOR S. Cox

Deputy Solicitor General

OFFICE OF THE ATTORNEY

GENERAL

900 East Main Street

Richmond, Virginia 23219

(804) 786-7240 — Telephone

(804) 371-0200 — Facsimile

sraphael@oag.state.va.us

*Counsel of Record

KAMALA D. HARRIS JANET T. MILLS

Attorney General of California Attorney General of Maine

1300 I Street, Suite 125 6 State House Station

Sacramento, CA 95814 Augusta, ME 04333

GEORGE JEPSEN BRIAN E. FROSH

Attorney Genera! Attorney General of Maryland

of Connecticut 200 Saint Paul Place

55 Elm Street . Baltimore, MD 21202

Hartford, CT 06106

MAURA HEALEY

MATTHEW P. DENN Attorney General

Attorney General of Delaware of Massachusetts

820 N. French Street, 6th Floor One Ashburton Place

Wilmington, DE 19801 Boston, MA 02108

KARL A. RACINE Jm™m Hoop

Attorney General for the Attorney General of

District of Columbia Mississippi

441 4th Street, NW P.O. Box 220

Washington, DC 20001 Jackson, MS 39205

RUSSELL A. SUZUKI JOSEPH A. FOSTER

Attorney General of Hawaii Attorney General of

425 Queen Street New Hampshire

Honolulu, HI 96813 33 Capitol Street

Lisa MADIGAN Concord, NH 03301

Attorney General of Illinois Hector H. BALDERAS

100 West Randolph Street, Attorney General of

12th Floor New Mexico

Chicago, IL 60601 P.O. Drawer 1508

Tom MILLER Santa Fe, NM 87504

Attorney General of Iowa Eric T. SCHNEIDERMAN

1305 E. Walnut Street Attorney General of

Des Moines, [A 50319 New York

120 Broadway, 25th Floor

JACK CONWAY New York, NY 10271

Attorney General of Kentucky

700 Capitol Avenue, Suite 118

Frankfort, KY 40601

Roy COOPER

Attorney General of

North Carolina

P.O. Box 629

Raleigh, NC 27602

WAYNE STENEHJEM

Attorney General of

North Dakota

600 E. Boulevard Avenue

Bismarck, ND 58505

ELLEN F. ROSENBLUM

Attorney General of Oregon

1162 Court Street, N.E.

Salem, OR 97301

KATHLEEN G. KANE

Attorney General of

Pennsylvania

16th Floor, Strawberry Square

Harrisburg, PA 17120

PETER F. KILMARTIN

Attorney General of

Rhode Island

150 South Main Street

Providence, RJ 02903

WILLIAM H. SORRELL

Attorney General of Vermont

109 State Street

Montpelier, VT 05609

ROBERT W. FERGUSON

Attorney General of

Washington

P.O. Box 40100

1125 Washington Street SE

Olympia, WA 98504

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.