[On interpretation of the statute as a whole and “such Exchange”]
Looking only at the language of [the subsidy calculation], isolated from the cross-referenced text [providing that the term “Exchange” shall mean a governmental agency or nonprofit entity that is established by a State, and that the federal government shall operate such “Exchange” in certain circumstances], the plaintiffs’ argument may seem the more intuitive one. Why would Congress have inserted the phrase “established by the State under [42 U.S.C. § 18031]” if it intended to refer to Exchanges created by a state or by HHS?
But defendants provide a plausible and persuasive answer: Because the ACA takes a state-established Exchange as a given and directs the Secretary of HHS to establish such Exchange and bring it into operation if the state does not do so. In other words, even where a state does not actually establish an Exchange, the federal government can create “an Exchange established by the State under [42 U.S.C. § 18031]” on behalf of that state.
[On Anomalies created by Plaintiff’s interpretation]
The defendants point to various provisions of the ACA that appear to reflect an intent by Congress to make tax credits available to taxpayers purchasing insurance from the federally-facilitated Exchanges; they also cite provisions that, if construed consistently with plaintiffs’ proposed definition, would create numerous anomalies within the statute that Congress could not have intended. See 26 U.S.C. § 36B(f)(3) (requiring reporting by federally-run Exchanges of advance payments of tax credits); 42 U.S.C. § 18032(f)(1)(A)(ii) (restricting any Exchange-based purchase of health insurance to residents of “the State that established the Exchange”); 42 U.S.C. § 1396a(gg) (providing that a state must maintain certain standards in its Medicaid program until “an Exchange established by the State under [42 U.S.C. § 18031] is fully operational”); 42 U.S.C. § 1397ee(d)(3)(B) (requiring HHS to determine, for each state, whether health plans offered through “an Exchange established by the State under [42 U.S.C. § 18031]” provide benefits for children comparable to those offered in the state’s CHIP plan).
[For example,] Section 1312 of the ACA, codified at 42 U.S.C. § 18032, sets forth provisions regarding which individuals may purchase insurance from the Exchanges. This section provides that only “qualified individuals” may purchase health plans in the individual markets offered through the Exchanges, and requires that a “qualified individual” be a person who “resides in the State that established the Exchange.” 42 U.S.C. § 18032(f)(1)(A)(ii). There is no separate provision defining “qualified individual” for purposes of the federally-facilitated Exchanges.
If this provision were read literally, no “qualified individuals” would exist in the thirty-four states with federally-facilitated Exchanges, as none of these states is a “State thatestablished [an] Exchange.” The federal Exchanges would have no customers, and no purpose. And this absurd construction can be avoided, say defendants, by viewing 42 U.S.C. § 18041 – the provision which grants states flexibility in the operation of Exchanges and permits the Secretary to establish and operate an Exchange when a state declines to do so – as authorizing the federal government to “stand in the shoes of the state” for purposes of Section 18032’s residency requirement.
[On Legislative Intent and Statutory Purpose]
Plaintiffs try to explain away the inconsistency between their proposed construction and the statute’s underlying purpose by proposing that Congress had another, equally pressing goal when it passed the ACA: convincing each state to set up its own health insurance Exchange. . . . The problem that plaintiffs confront in pressing this argument is that there is simply no evidence in the statute itself or in the legislative history of any intent by Congress to ensure that states established their own Exchanges. And when counsel for plaintiffs was asked about this at oral argument, he could point to none. See Dec. 3, 2013 Tr. 8-18.
Furthermore, there is no evidence that either the House or the Senate considered making tax credits dependent upon whether a state participated in the Exchanges. To the contrary, Congress assumed that tax credits would be available nationwide. See, e.g., Congressional Budget Office, An Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act Defs.’ SJ Mot., Ex. 5, at 2, 4-7 (Nov. 30, 2009) (calculating anticipated subsidies across all states); Letter from Douglas W. Elmendorf, Director, CBO, toRep. Darrell Issa, Chairman, House Committee on Oversight and Government Reform, Defs.’ SJMot., Ex. 17, at 1 (Dec. 6, 2012) (“To the best of our recollection, the possibility that those subsidies would only be available in states that created their own exchanges did not arise during the discussions CBO staff had with a wide range of Congressional staff when the legislation was being considered.”). Plaintiffs hang much of their argument on the suggestion of one contemporaneous commentator that Congress could incentivize state participation in the Exchanges “by offering tax subsidies for insurance only in states that complied with federal requirements.” Timothy S. Jost, Health Insurance Exchanges: Legal Issues 7, O’Neill Institute, Georgetown Univ. Law Ctr., no. 23, April 27, 2009. But there is no evidence in the legislative record that the House, the Senate, any relevant committee of either House, or any legislator ever entertained this idea.