To help achieve the statute’s goal of near universal coverage, the ACA provides that individuals can purchase competitively-priced health insurance on American Health Benefit Exchanges (“Exchanges”) that may be run by either the States or the federal government. It also authorizes a federal tax credit for low and middle-income individuals who purchase insurance on the Exchanges. The Internal Revenue Service (“IRS”) issued a regulation confirming that the federal tax credit is available to all financially eligible Americans, regardless of whether they purchase insurance on a state-run or federally-facilitated Exchange.

The plaintiffs in Halbig filed a lawsuit in the United States District Court for the District of Columbia challenging the IRS rule on the ground that the ACA authorizes tax credits only for individuals who purchase insurance on state-established Exchanges. Among other things, the plaintiffs argued that the purpose of the provision for tax credits and subsidies was to induce States to set up their own Exchanges, under penalty of withdrawal of those credits and subsidies if States chose to allow the federal government to operate Exchanges in their stead. On January 15, 2014, Judge Paul Friedman rejected these arguments and granted summary judgment in favor of the IRS, holding that the ACA’s tax credits for health care insurance are available to low and middle-income individuals, whether they have purchased insurance through a federally or state-operated Exchange. The plaintiffs appealed, and the U.S. Court of Appeals for the D.C. Circuit granted an expedited appeal of Judge Friedman’s ruling.

On February 14, 2014, CAC filed an amici curiae brief in the D.C. Circuit on behalf of members of Congress who led the enactment of the ACA and members of state legislatures who served during the period when their governments were deciding whether to create their own Exchanges, including Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi. Our brief, which urged the court of appeals to affirm the lower court’s ruling, demonstrated that the purpose attributed to Congress by plaintiffs was never contemplated by the federal legislators who enacted the law nor by the state officials charged with deciding whether to establish their own Exchanges. It also demonstrated that the text, purpose, and history of the ACA support amici’s position.

As our brief explained, the purpose of the tax credit provision is to facilitate access to affordable insurance through the Exchanges, not, as the plaintiffs argued, to incentivize the establishment of state Exchanges above all else, and certainly not to thwart Congress’s fundamental purpose of making insurance affordable for all Americans. Our brief demonstrated that there was no evidence in the legislative history of the ACA to suggest that Congress ever intended or communicated to the States that the availability of the tax credit depended upon the establishment of a state Exchange. In fact, we showed that the opposite was true: everyone, including amici members of Congress, understood that tax credits would be available to purchasers on all of the Exchanges. Further, state government officials never understood the tax credits to be limited to state-run Exchanges. Rather, as the state legislator amici know from their own experiences, the States considered many factors in deciding whether or not to set up their own Exchanges, and the possibility that not setting up a state-run Exchange would result in the loss of tax credits to the State’s citizens was never one of these considerations.

The D.C Circuit heard oral argument in Halbig on March 25, 2014.

On July 22, 2014, the court held, in a 2-1 decision, that individuals purchasing health insurance under the ACA are eligible for federal tax credits only when they purchase insurance on an Exchange established by a State. Writing for the court, Judge Thomas Griffith concluded that the plain text of the statute “unambiguously restricts” tax credits and subsidies to those who purchase insurance on a state-run Exchange, and not a federally-facilitated one. Judge Raymond Randolph joined Judge Griffith’s opinion and also wrote a concurrence.

Judge Harry Edwards dissented, and chided the “[a]ppellants’ not-so-veiled attempt to gut” the ACA. In his dissent, Judge Edwards pointed to the majority’s faulty analysis, particularly its failure to consider congressional intent, legislative history, and the text of the statute as a whole. Relying extensively on CAC’s brief, Judge Edwards also observed that there “is no credible evidence in the record that Congress intended to condition subsidies on whether a State, as opposed to HHS, established the exchange. Nor is there credible evidence that any State even considered the possibility that its taxpayers would be denied subsidies if the State opted to allow HHS to establish an Exchange on its behalf.” Read CAC’s reaction to Halbig here.

The same day that the D.C. Circuit released its decision in Halbig, the Fourth Circuit released its decision in King v. Burwell, a case brought by the same lawyers and raising the same challenge to the availability of subsidies for individuals purchasing health insurance on federally-facilitated Exchanges. In that case, as in Halbig, the district court had upheld the IRS Rule that confirms that such subsidies are valid. Unlike the D.C. Circuit, the Fourth Circuit affirmed the lower court ruling (3-0). Read about the Fourth Circuit’s decision in King here and CAC’s reaction here.

On July 31, 2014, the plaintiffs in King filed a cert. petition asking the Supreme Court to hear the case. In the meantime, on September 4, 2014, the full D.C. Circuit agreed to hear Halbig en banc, vacated the panel’s decision, and scheduled oral argument before the full court for December 17, 2014. On November 3, 2014, CAC filed an en banc stage amici curiae brief in Halbig on behalf of members of Congress and state legislatures, urging the full court of appeals to affirm the lower court’s ruling. On November 7, 2014, despite the pendency of re-hearing en banc in Halbig and the lack of a circuit split, the Supreme Court agreed to review King. In light of that, the D.C. Circuit issued an order on November 12 removing Halbig from the oral argument calendar and holding the case in abeyance pending disposition of King by the Supreme Court. Following the Supreme Court’s ruling in King on June 25, 2015 rejecting the challenge to the ACA, the plaintiffs in Halbig voluntarily moved to dismiss their case. On July 9, 2015, the D.C. Circuit granted the plaintiffs’ motion and dismissed Halbig.

For more information on the Supreme Court’s decision in King, please visit our case page for King v. Burwell.