Can some legal-ish people help me understand the absurdity of King and Halbig?

[Rstrstx]

The case has fascinated me because it goes to the heart of so many issues. To me it seems pretty straightforward (in a twisted way), I was wondering if someone more familiar with how laws are interpreted can help out.

The basic facts of the case: King and Halbig object to the subsidies because under tax code 36b is states people can receive credit if enrolled in "an Exchange established by the State under 1311". They have emphasized the four words "established by the State" but I want to look at what immediately follows - "under 1311"

Looking up Section 1311 of the ACA says a couple of things about an Exchange; one is that it directs states to establish one, but most importantly it defines an Exchange as follows:

An Exchange shall be a governmental agency or nonprofit entity that is established by a State

Thus the definition of an Exchange is spelled out, as I understand it for the rest of the ACA (could be wrong, but it really only needs to hold for the section 1321 for states that fail to establish an exchange), just a bit below section 1311. That part of Section 1321 states:

the Secretary shall (directly or through agreement with a notforprofit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements

So if I'm reading this right, 1321 gives the Secretary the right to establish an Exchange, which was described in 1311.

If we are literalists and substitute what the literal meaning of an Exchange as described in 1311 we get the following:

Section 1321 can be read as:

the Secretary shall (directly or through agreement with a notforprofit entity) establish and operate a governmental agency or nonprofit entity that is established by a State within the State and the Secretary shall take such actions as are necessary to implement such other requirements

And the tax code 36b can be read as:

the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through a governmental agency or nonprofit entity that is established by a State established by the State under 1311 [1] of the Patient Protection and Affordable Care Act

Note the redundancy in 36b. How do you resolve it? It seems a particular problem for plaintiffs, who want a literal unbending interpretation of 36b yet that would require the first "established by a State" be fundamentally different than the immediate "established by the State". How can they mean two different things? You could argue that later regulations clarifying what a State Exchange is, but that would require you to specifically omit the phrase "under 1311" from the tax code.

What are the legal ways of resolving these discrepancies in definition? I know the IRS has to demonstrate ambiguity to determine that an Exchange can be either a state or federal exchange to issue tax credits, but if read strictly they are required to issue tax credits per 1311 and the followup in 1321; at the very least ambiguity can be established.

[Proud Liberal Dem]

1. What I am confused about is

Who had standing for this lawsuit and how and why are they so determined to make people's lives miserable by trying to take away their subsidies? And as a follow up bonus question, why is SCOTUS chomping at the bit to hear this when it has not been resolved at Circuit- and following a decision to trash the ruling that upheld the lawsuit?

[badtoworse]

2. Where is the money to pay the subsidies coming from?

[Rstrstx]

4. The Treasury

The IRS handles the doling out of subsidies to insurance companies

[badtoworse]

7. OK. What taxes were implemented to offset the cost?

Somebody's picking up the tab. Who is it?

[Rstrstx]

8. I know one of them..

..was the medical device tax, don't know about the rest

[Rstrstx]

6. That last part is pure speculation

I've suspected one of the liberal judges may want to hear this before they retire and think the court may go nowhere but downhill but nobody knows which 4 (or more) chose to hear it. We DO know they didn't take it the first week, which is a bit odd.

The first part is wishy washy but the courts have held, at least in the case of Halbig I think, that since he was out of pocket a whopping $20 because he had to buy insurance he had suffered harm and therefore had standing. I know it makes you want to roll your eyes, but that's what they ruled.

[GeorgeGist]

3. I'm not a lawyer but I doubt the intent of Congress ...

was to prevent people in backward states from benefitting from ACA.

[Rstrstx]

5. They're not arguing intent

If they did they'd lose big. They want a strict interpretation of the tax code

[Rstrstx]

9. This is my logic, summarized:

Section 1311 of the ACA defines an Exchange as an entity established by a State

Section 1321 of the ACA directs the Secretary to establish an Exchange for a state that hasn't done so

Therefore the Secretary has the ability to create an Exchange established by the State


If this logic is correct there should be no conflict with the tax code

[ctaylors6]

10. you may also want to read s1401

which provides for the credits. It specifically refers to "an Exchange established by the State under section 1311" when it provides for tax credits.

Also I believe there's a provision that says that exchanges created by territories are to be treated as the equivalent of state-run exchanges. The legislation does not say that for federally run Exchanges. An incorporating statement like that is commonly included in legal documents. Why not here?

Also the law creates 2 different exchanges - s1311 exchanges and s1321 exchanges. Why 2 different types if there were zero differences between them?

There's legislative history too. The IRS says there's nothing in it to suggest Congress did intended for subsidies to go only to state-run exchanges. But there's some history that Congress was using subsidies as incentive for states to establish exchanges (similar to Medicaid issues). Furthermore, many of those in Congress assumed the state would establish their own exchanges and did not anticipate that so many would be under a federal exchange. A failure to anticipate that circumstance and not providing for it in the law are very different than saying it's simply a drafting error.

I'm not saying any of this is dispositive or that I agree with any particular position. Just wanted to point out a few counter-arguments.

[Rstrstx]

11. I don't believe there are two different exchanges

Section 1311 controls the definition of an exchange and directs the state to establish such exchange, and 1321 directs the Secretary to create such an exchange should the state fail to do so. The definition of "Exchange" laid out in 1311 was not changed in 1321 so in a literal reading the Secretary established a 1311 exchange (meaning it was "established by a State&quot . In the literal world if they had wanted it to mean something else they would have redefined it, but they didn't and I know of no place in the ACA or any code that refers to "a 1321 exchange".

I know it sounds convoluted and it would make more sense to read it as the Secretary is acting on behalf of the State. But they didn't do that, they just said she was to establish an Exchange, which by definition meant she was establishing "an entity established by a State".

And that's part of King's problem, they want the court to look at those four words in the tax code (probably the same as your s1401) "Exchange established by the State" in a literal way without going back to the relevant parts of Secs. 1311 and 1321 and having them literally interpreted as well.

And yes I'm well aware of the history of the law, it's hard not to read an article without some pundit offering some spin about what the law is supposed to be, generally from the usual suspects.