Halbig v. Burwell (Summary)

AFFORDABLE CARE ACT

Halbig v. Burwell
No. 14-5018 (D.C. Cir. July 22, 2014)

The U.S. Court of Appeals for the District of Columbia ruled that the Patient Protection and Affordable Care Act (“ACA”) did not authorize the Internal Revenue Service to provide tax credits for individuals who purchase insurance policies on the federal health exchange. The plaintiffs in this lawsuit challenged the IRS’s interpretation of a particular section in the ACA addressing “premium assistance amounts.” Under the ACA, these premium assistance amounts provide eligible individuals with tax credits that reduce the cost of acquiring a health insurance policy.

The court explained that the crux of the case turned upon whether exchanges established by the federal government were included under the phrase “Exchange established by the State.” The term “Exchange” means a health exchange, which is a kind of marketplace where people can compare and purchase different insurance plans. At this time, 16 states have established their own exchange. The rest use exchanges run wholly or partially by the federal government.

Each party in the lawsuit disputed the appropriate interpretation of the phrase “Exchange established by the State.” The plaintiffs argued that the court should read this phrase narrowly, limiting tax credits to individuals who purchased their policies on one of the 16 state-run exchanges. In contrast, the IRS argued that reading the phrase so narrowly would lead to significant contradictions with other parts of the ACA. The IRS had originally interpreted this law to permit the federal government to “stand in the shoes” of a state when creating an exchange. Under the IRS’s reading, individuals would not be denied tax credits because they did not purchase their policy from a state-run exchange.

The D.C. Circuit ruled that the government could offer no textual basis for concluding that a federally-established exchange could be considered “established by a state.” It held that in the absence of such evidence, the court was not permitted to ignore the text of the law simply because it led to odd results.