# Amicus Curiae Brief — King v. Burwell, 135 S. Ct. 475 (2014) (No. 14-114) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0338%3A64 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 2014 ## Text No. 14-114 — In The Supreme Court of the An ¢ DAVID KING, ET AL., Petitioners, w 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 e 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 e 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. i TABLE OF CONTENTS Page hg by | - +, 9 5 + 5 Renn i Ee GO TRE ETI cd ondicnisis ninssniwsecesetsneinensacs ii pe Ps gy | yy | - eens iv I gs enacting eiceaacacduevtienansuacntonvaaus xix 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 iv 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 vi 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 © DIB A) ececcnccccscsocececsssvnbiaseasabonaceeeseaie a aaa 4,31 © BE SL os oxnccnnecicsecesshnucteczcutanmeseemes = Gane 1, 4, 31 © RBG TE) .ovccscovseseconsscensdscpedinesscensasnsnsasedeaeteienanaa 31 ROB EIB oseccncecscaccecccsscnsssansseesedscaiscacencseaeeeaaee 31 © RBOBII LMA). .cnsscccccsccsscccvcctensessattinsecen eee 34 DS LBOG RO). .escecesccvesexsssssucsanavcudeesasseeenscnianbints aera 31 BS PROG ECID) cece cescenccorcmsnac cee i, 5, 31, 32, 34 © LOOT ICE) ..00ccsccccnescosevscesesenexsbunseenesevaabiuunsbiaanennannann 5 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 ix 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 x 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 xu 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 XV 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. 1 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 2 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. o 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 3 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 4 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). 5 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/. 6 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) 7 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) 8 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. a 9 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 10 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) 11 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. 12 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). 13 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). © 548 U.S. 291 (2006). * 20 U.S.C. § 1415(iX3XB). * 548 U.S. at 296 (emphasis added). * Id. (emphasis added). ~ 14 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). © Id. at 2659 (joint opinion of Scalia, Kennedy, Thomas, and Alito, JJ., dissenting). “ Td. at 2666. “ New York v. United States, 505 U.S. 144, 168 (1992). 15 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). 16 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). 17 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. 18 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). 19 * 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. > © Health Insurance Exchanges: Progress Report: Hearing 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). 20 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). 21 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. et “ 2011 Haw. Sess. Laws, Act 205, § 2. 22 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. 23 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. 24 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. 29 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). 26 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). 27 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. 28 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) 29 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... .”). © U.S. Nat'l Bank v. Indep. Ins. Agents of Am., 508 U.S. 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. 30 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). 31 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). 32 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. 33 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). 34 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). 35 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) 36 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). 37 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). 38 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). 39 $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). 40 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)). 41 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). 42 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)). 43 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. 44 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. 45 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 46 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 47 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 --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385016_0338%3A64. Public record. Not legal advice.