Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca6-16-03093/USCOURTS-ca6-16-03093-0/pdf.json

Nature of Suit Code: 870
Nature of Suit: Tax Suits
Cause of Action: 

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RECOMMENDED FOR FULL-TEXT PUBLICATION 

Pursuant to Sixth Circuit I.O.P. 32.1(b) 

File Name: 17a0040p.06 

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT 

THE STATE OF OHIO et al., 

Plaintiffs-Appellants, 

v. 

UNITED STATES OF AMERICA et al., 

Defendants-Appellees. 

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No. 16-3093 

Appeal from the United States District Court 

for the Southern District of Ohio at Columbus. 

No. 2:15-cv-00321—Algenon L. Marbley, District Judge. 

Argued: September 27, 2016 

Decided and Filed: February 17, 2017 

 Before: COLE, Chief Judge; DAUGHTREY and MOORE, Circuit Judges. 

_________________ 

COUNSEL 

ARGUED: Frederick D. Nelson, OFFICE OF THE OHIO ATTORNEY GENERAL, 

Columbus, Ohio, for Appellants. Alisa B. Klein, UNITED STATES DEPARTMENT OF 

JUSTICE, Washington, D.C., for Appellees. ON BRIEF: Frederick D. Nelson, Eric E. 

Murphy, Peter T. Reed, OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, 

David P. Fornshell, WARREN COUNTY PROSECUTOR, Lebanon, Ohio, Stuart Kyle Duncan, 

SCHAERR │ DUNCAN LLP, Washington, D.C., for Appellants. Alisa B. Klein, Mark B. 

Stern, Samantha L. Chaifetz, UNITED STATES DEPARTMENT OF JUSTICE, Washington, 

D.C., for Appellees. Jeffrey A. Chanay, OFFICE OF THE KANSAS ATTORNEY GENERAL, 

Topeka, Kansas, for Amicus Curiae. 

>

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_________________ 

OPINION 

_________________ 

KAREN NELSON MOORE, Circuit Judge. This case involves a novel challenge to the 

Patient Protection and Affordable Care Act (“Affordable Care Act” or “ACA”), and presents us 

with the question of whether one of the ACA’s tax provisions applies to state government 

employers with the same force that it applies to private employers. Plaintiffs-Appellants the 

State of Ohio and several of its political subdivisions and public universities (“Ohio” or the 

“State”) filed suit against, inter alia, the United States Department of Health and Human Services 

(“HHS”), alleging that the Federal Government illegally collected certain monies from the State 

in order to supplement the Affordable Care Act’s Transitional Reinsurance Program 

(“Program”). Arguing that the Program’s mandatory payment scheme applies only to private 

employers and not to state and local government employers, Ohio sought a refund of all 

payments made on its behalf and a declaration that the Program would not apply to the State in 

the future. Ohio also argued that application of the Program against the State violated the Tenth 

Amendment to the United States Constitution and principles of intergovernmental tax immunity. 

The district court, in a thorough and reasoned opinion, granted a motion to dismiss filed by the 

United States, and denied a motion for summary judgment filed by Ohio. The district court 

concluded that the Program applies to state and local government employers just as it applies to 

private employers, and that the Program as applied to Ohio does not violate the Tenth 

Amendment. For the reasons stated below, we AFFIRM. 

I. BACKGROUND 

Congress enacted the Affordable Care Act in 2010 to address concerns regarding 

nationwide access to affordable, quality healthcare. King v. Burwell, --U.S.--, 135 S. Ct. 2480, 

2485–86 (2015) (“The Patient Protection and Affordable Care Act adopts a series of interlocking 

reforms designed to expand coverage in the individual health insurance market.”). Among the 

ACA’s provisions are (1) a tax credit to help individuals purchase health insurance through 

public healthcare Exchanges; (2) a ban on insurers considering an individual’s health when 

deciding whether to provide insurance or in setting the premium; and (3) a requirement that each 

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individual maintain insurance coverage or remit payment to the Internal Revenue Service. Id. at 

2486–87. While many of the ACA’s requirements have been the subject of widespread litigation 

and controversy, this case revolves around a lesser-known provision, the Transitional 

Reinsurance Program. See 42 U.S.C. § 18061. The Program is a premium-stabilization 

arrangement that aims to combat volatility in the individual market by collecting payments from 

“health insurance issuers” and “group health plans” and distributing those payments over a threeyear period to health insurance issuers that cover high-risk individuals in the individual market. 

See Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters 

for 2014 (Final Rule), 78 Fed. Reg. 15,410, 15,411 (Mar. 11, 2013) (“The Affordable Care Act 

establishes . . . a transitional reinsurance program . . . to provide payments to health insurance 

issuers that cover higher-risk populations and to more evenly spread the financial risk borne by 

issuers.”). Specifically, the ACA mandates that: 

(1) In general 

In establishing the Federal standards under section 18041(a) of this 

title, the Secretary, in consultation with the National Association of 

Insurance Commissioners (the “NAIC”), shall include provisions 

that enable States to establish and maintain a program under 

which— 

(A) health insurance issuers, and third party administrators on 

behalf of group health plans, are required to make payments to an 

applicable reinsurance entity for any plan year beginning in the 3-

year period beginning January 1, 2014 (as specified in paragraph 

(3)[)], and 

(B) the applicable reinsurance entity collects payments under 

subparagraph (A) and uses amounts so collected to make 

reinsurance payments to health insurance issuers described in 

subparagraph (A) that cover high risk individuals in the individual 

market (excluding grandfathered health plans) for any plan year 

beginning in such 3-year period. 

42 U.S.C. § 18061(b)(1) (footnote omitted); see also id. § 18041(a)(1)(C), (c)(1) (providing that 

HHS may establish reinsurance programs for states that decline to do so). Ohio’s reinsurance 

program is operated by HHS. 

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The State of Ohio and several of its political subdivisions have paid contributions 

(totaling approximately $5.4 million for benefit year 2014) to the Program under protest. 

Additionally, four state universities that have joined Ohio in this suit (University of Akron, 

Shawnee State University, Bowling Green State University, and Youngstown State University) 

have paid nearly $765,000 to the Program. R. 13 (Am. Compl. at 9–13) (Page ID #67–71). 

Of the approximately $25 billion in revenue that is expected to be generated from the 

Program, $20 billion is paid to certain health insurance providers to supplement those providers 

covering high-risk individuals. 42 U.S.C. § 18061(b)(3)(B)(ii). The remaining five billion 

dollars are “deposited into the general fund of the Treasury of the United States and may not be 

used” for the Program. Id. §§ 18061(b)(3)(B)(iii), (iv), and (b)(4). 

The term “health insurance issuer” as it applies to the transitional reinsurance program, 

means an insurance company, insurance service, or insurance organization 

(including a health maintenance organization, as defined in paragraph (3)) which 

is licensed to engage in the business of insurance in a State and which is subject to 

State law which regulates insurance (within the meaning of section 514(b)(2) of 

the Employee Retirement Income Security Act of 1974 [29 U.S.C.A. 

§ 1144(b)(2)]. Such term does not include a group health plan. 

42 U.S.C.A. § 300gg-91(b)(2). The term “group health plan,” 

means an employee welfare benefit plan (as defined in section 3(1) of the 

Employee Retirement Income Security Act of 1974 [29 U.S.C.A. § 1002(1)]) to 

the extent that the plan provides medical care (as defined in paragraph (2)) and 

including items and services paid for as medical care) to employees or their 

dependents (as defined under the terms of the plan) directly or through insurance, 

reimbursement, or otherwise. 

42 U.S.C.A. § 300gg-91(a)(1). The amount owed by each health insurance issuer and group 

health plan is determined by multiplying enrollment count (as self-reported by each required 

entity) by a previously determined contribution rate for each applicable benefit year. 45 C.F.R. 

§ 153.405(a). 

On January 26, 2015, Plaintiffs (State of Ohio; Warren County, Ohio; The Ohio 

Department of Administrative Services; University of Akron; Shawnee State University; 

Bowling Green State University; and Youngstown State University) filed this action against the 

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United States, HHS, and the Secretary of HHS in her official capacity. R. 1 (Compl.) (Page ID 

#1). On February 13, 2015, Plaintiffs filed an Amended Complaint adding Plaintiff Ohio 

Turnpike and Infrastructure Commission. R. 13. (Am. Compl.) (Page ID #58). The Amended 

Complaint alleges that: 

1. The United States illegally or erroneously assessed or collected tax 

revenue from Plaintiffs; 

2. The Secretary’s interpretation of group health plans is arbitrary, 

capricious, an abuse of discretion, or otherwise not in accordance with the 

law; and 

3. Defendants collected tax revenues in violation of the Tenth Amendment to 

the United States Constitution, anti-commandeering principles, and the 

Intergovernmental Tax Immunity Doctrine. 

R. 13 (Am. Compl. at 14–18) (Page ID #72–76). On March 25, 2015, the United States District 

Court for the Southern District of Ohio issued a scheduling order memorializing the parties’ 

agreement to forgo discovery and submit the case on motions. R. 16 (Sched. Order) (Page ID 

#85). Defendants filed a motion to dismiss for failure to state a claim on April 10, 2015. R. 17 

(Mot. to Dismiss) (Page ID #86). Plaintiffs filed a motion for summary judgment and a 

memorandum in opposition to Defendants’ motion to dismiss on May 15, 2015. R. 18 (Mot. for 

S. J. and Opp. to Mot. to Dismiss) (Page ID #114). Defendants filed a response in opposition to 

the motion for summary judgment and in reply in support of their motion to dismiss on July 2, 

2015. R. 21 (Def. Resp. in Opp. to Mot. for S. J. and Reply in Support of Mot. to Dismiss) (Page 

ID #189). Plaintiffs filed a reply in support of their motion for summary judgment and a 

memorandum in opposition to Defendants’ motion to dismiss on August 4, 2015. R. 22 

(Plaintiffs’ Reply in Support of Mot. for S. J. and in Opp. to Mot. to Dismiss) (Page ID #223). 

The district court held a hearing on the motions on December 22, 2015. 

 On January 5, 2016, the district court granted Defendants’ motion to dismiss for failure to 

state a claim and denied Plaintiffs’ motion for summary judgment. The district court found that: 

(1) Pursuant to the Administrative Procedure Act, the court had jurisdiction to review the 

determination of HHS that the Transitional Reinsurance Program applies to health plans 

provided on behalf of Ohio to its employees; (2) the Program applies to state and local 

government employers; and (3) application of the Program to the States does not violate the 

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Tenth Amendment or the intergovernmental tax immunity doctrine. Ohio v. United States, 

154 F. Supp. 3d 621 (S.D. Ohio 2016). Plaintiffs appealed. R. 26 (Notice of Appeal) (Page ID 

#331). 

 Ohio is not alone in claiming that the Program does not apply to the States. The States of 

Kansas, Arizona, Indiana, Louisiana, Montana, Nevada, Oklahoma, South Carolina, South 

Dakota, Utah, West Virginia, Wisconsin, and Wyoming have submitted an amicus brief in 

support of Ohio. Amici argue, as does Ohio, that the ACA does not apply the Program to the 

States under the ERISA definition of welfare benefit program or the clear statement rule; that 

state tax immunity extends beyond discriminatory laws; and that the Program interferes with 

state sovereignty and does not represent a traditional source of federal revenue. 

II. DISCUSSION 

A. Standard of Review 

“We review de novo a district court’s dismissal of a suit” for failure to state a claim. 

United States ex rel. Sheldon v. Kettering Health Network, 816 F.3d 399, 407 (6th Cir. 2016). 

“A motion to dismiss under Fed. R. Civ. P. 12(b)(6) is designed to test the sufficiency of the 

complaint. ‘The district court must construe the complaint in a light most favorable to the 

plaintiff, accept all of the factual allegations as true, and determine whether the plaintiff 

undoubtedly can prove no set of facts in support of his claims that would entitle him to relief.’” 

Riverview Health Institute LLC v. Medical Mutual of Ohio, 601 F.3d 505, 512 (6th Cir. 2010) 

(quoting Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir. 1995)). 

We note at the outset that the district court’s opinion in this case was thoughtful, 

evenhanded, and well-reasoned. After having conducted our own thorough and de novo review, 

for the reasons stated below, we affirm the district court’s judgment in its entirety. 

B. Group Health Plans and the Transitional Reinsurance Program 

The State of Ohio challenges the district court’s determination that “Congress intended 

the Transitional Reinsurance Program to apply to state and local government employers in the 

same manner that the program applies to private-sector employers. The text, structure, and 

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purpose of the Affordable Care Act and related statutes compel this result.” Ohio, 154 F. Supp. 

3d at 633. Ohio’s objections to the application of the Transitional Reinsurance Program to the 

States are both statutory and constitutional. Ohio first argues that the Program cannot apply to 

the States pursuant to both the “plain statement rule” and the ERISA statute. Appellants Br. at 

14. Second, Ohio suggests that application of the Program to the States is unconstitutional under 

both the anti-commandeering doctrine and the intergovernmental tax immunity doctrine. Id. at 

15. The United States counters that, “Plaintiffs’ reliance on clear statement principles does not 

advance their position because the relevant statutory provisions clearly encompass their plans,” 

Appellees Br. at 10, and “[t]heir intergovernmental tax immunity claim fails because that 

immunity applies to taxes that discriminate against state or local governments . . . and the 

transitional reinsurance program is nondiscriminatory,” id. (internal citation omitted). 

 1. The Term “group health plan” Applies to State-Provided Health Insurance Plans 

 Ohio first argues that the Transitional Reinsurance Program does not apply to the States 

because the statute’s definition of “group health plans” does not encompass plans offered to state 

employees. Appellants Br. at 16. Ohio is correct that Transitional Reinsurance Program statute 

does not explicitly define group health plans to include states nor does it list states as being 

required to remit payment under the ACA. The United States responds that “the Act expressly 

adopts the Public Health Service Act’s definition of ‘group health plan’. . . [which] clearly 

includes plans offered by state and local government employers . . . .” Appellees Br. at 11. 

 The relevant statute, 42 U.S.C. § 18061(b)(1)(A), requires that “health insurance issuers, 

and third party administrators on behalf of group health plans, are required to make payments to 

an applicable reinsurance entity for any plan year beginning in the 3-year period beginning 

January 1, 2014 . . . .” This section of the ACA does not explicitly define the term “group health 

plans.” Instead, the statutory framework adopts a series of cross-references to both the Public 

Health Service Act (“PHSA”) and the Employee Retirement Income Security Act of 1974 

(“ERISA”). First, the ACA adopts expressly the PHSA’s definition of “group health plan” as 

defined by 42 U.S.C. § 300gg-91(a). 42 U.S.C. § 18021(b)(3) (“The term ‘group health plan’ 

has the meaning given such term by section 300gg-91(a) of this title.”). As stated in 42 U.S.C. 

§ 300gg-91, a “group health plan” is “an employee welfare benefit plan (as defined in section 

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3(1) of the Employee Retirement Income Security Act of 1974 [29 U.S.C.A. § 1002(1)]) to the 

extent that the plan provides medical care . . . to employees or their dependents . . . directly or 

through insurance, reimbursement, or otherwise.” ERISA defines “employee welfare benefit 

plan” in turn as “any plan . . . established or maintained by an employer or by an employee 

organization, or by both . . . for the purpose of providing for its participants or their beneficiaries, 

through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits 

. . . .” 29 U.S.C. § 1002(1). 

 The Public Health Service Act explicitly contemplates that plans like Ohio’s are covered 

under the definition of “group health plan.” Under a section titled “Limitation on application of 

provisions relating to group health plans,” the PHSA specifically provides that certain “nonFederal governmental plans” may elect to be excluded from certain provisions of the PHSA. 

42 U.S.C. § 300gg-21(a)(2). Congress must have therefore intended that a subset of group health 

plans include certain non-Federal governmental plans. The PHSA’s enforcement mechanism 

further supports the Federal Government’s argument that non-Federal governmental plans are 

indeed a subset of group health plans under the PHSA. Generally, the PHSA grants enforcement 

authority over health insurance issuers to the States. 42 U.S.C. § 300gg-22(a). However, the 

Federal Government exercises enforcement authority over “group health plans that are nonFederal governmental plans.” Id. § 300gg-22(b)(1)(B). 

 Provisions in ERISA further support that Congress intended the term “group health 

plans” to include plans offered by state and local government employers. ERISA defines both 

“employee welfare benefit plan” and “governmental plan.” 29 U.S.C. §§ 1002(1), (32). An 

“employee welfare benefit plan” is “any plan, fund, or program which was heretofore or is 

hereafter established or maintained by an employer . . . .” Id. § 1002(1). A “governmental plan” 

is “a plan established or maintained for its employees by the Government of the United States, 

by the government of any State or political subdivision thereof, or by any agency or 

instrumentality of any of the foregoing.” Id. § 1002(32). Similar to the PHSA, ERISA 

contemplates that a governmental plan is a type of employee welfare benefit plan. See id. 

§ 1003(b)(1) (“The provisions of this subchapter shall not apply to any employee benefit plan if 

. . . such plan is a governmental plan (as defined in section 1002(32) of this title).” That 

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Congress provided an exclusion for governmental plans from certain provisions of ERISA that 

apply to employee welfare benefit plans confirms, under the ERISA definition that applies to the 

ACA, that governmental plans are employee welfare benefit plans. To conclude otherwise 

“violates the interpretive canon that cautions against construing statutory language in a way that 

renders any of it superfluous.” U.S. v. Llanez-Garcia, 735 F.3d 483, 498 (6th Cir. 2013). 

 Ohio contends that reliance on ERISA is misplaced because ERISA’s definition of the 

term “employee benefit plan” uses the word “employer” which is defined elsewhere in the statute 

using, inter alia, the word “person.” Appellants Br. at 19. We need not reach this issue because 

the definitions in the PHSA and ERISA are clear that the term “group health plans” under the 

ACA encompasses employee welfare benefit plans, which include governmental plans. We have 

previously rejected an argument similar to Ohio’s. See Cunningham v. Gibson Cty., Nos. 95-

6665, 95-6667, 1997 WL 123750, at *2 (6th Cir. Mar. 18, 1997) (“[I]f defendants’ argument that 

local governments are not persons within the meaning of [the Fair Labor Standards Act] is 

accepted, the result is exemption of local governments from even FLSA’s most fundamental 

provisions. As this cannot be understood to have been the intent of Congress, the defendants’ 

argument must fail.”). Similarly, adopting Ohio’s argument that ERISA’s use of the term 

“person” evinces Congress’s intent not to cover states requires that the statute’s explicit 

indications to the contrary be ignored. We will not do so. Congress has demonstrated an ability 

explicitly to exempt state and local governments from certain requirements in the past, and it 

chose not to do so with respect to the Program. We therefore conclude that Congress intended 

the Transitional Reinsurance Program to apply to the States with the same force that it applies to 

private employers. 

 2. Ohio’s Michigan v. United States and “Plain Statement Rule” Arguments Fail 

 Ohio next argues that the health plans it offers to its employees and those plans offered to 

the employees of its subdivisions do not qualify as group health plans under the Act because 

Congress has never made a plain statement of its intent. The United States responds that “[c]lear 

statement principles do not advance [Ohio’s] position, because the relevant statutory text clearly 

encompasses [Ohio’s] plans.” Appellees Br. at 24. Ohio relies heavily on Michigan v. United 

States for the proposition that Congress must make a plain statement regarding any tax that it 

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wishes to impose directly against a state. Mich. v. U.S., 40 F.3d 817, 824 (6th Cir. 1994). In 

Michigan, we held both that the Michigan Educational Trust, which was established to assist 

parents in financing their children’s college educations, was a public agency not subject to 

federal income taxation in the absence of a plain statement from Congress, and that the plain 

statement rule applies in the tax field. 40 F.3d at 818. Ohio is correct that in Michigan we 

reiterated that “before a federal tax can be applied to activities carried on directly by the States 

. . . the intention of Congress to tax them should be stated expressly and not drawn merely from 

general wording of the statute applicable ordinarily to private sources of revenue.” Id. at 823 

(internal quotation marks omitted). 

Ohio, however, asks too much of the ACA. The Supreme Court has “never required that 

Congress make its clear statement in a single section or in statutory provisions enacted at the 

same time.” Kimel v. Florida Bd. of Regents, 528 U.S. 62, 76 (2000). Thus, we conclude that 

the ACA’s cross-reference definitional scheme is perfectly appropriate. See also Sebelius v. 

Auburn Reg’l Med. Ctr., 133 S. Ct. 817, 824 (2013) (holding that Congress need not “incant 

magic words in order to speak clearly,” and requiring that the Court “consider ‘context, including 

this Court’s interpretations of similar provisions in many years past.’”(citation omitted)). When 

considering the Transitional Reinsurance Program in the context of the ACA (including the 

relevant definitions provided by the PHSA and ERISA) and our interpretations of similar 

provisions in cases past, we conclude that it is evident that Congress intended the term “group 

health plans” to encompass Ohio’s plan. 

 Ohio’s reliance on Michigan is misplaced for another important reason: Michigan dealt 

with a statutory scheme that was directed specifically toward corporations. The United States in 

Michigan failed to provide any evidence that Congress intended to tax state trusts, and even 

conceded that the statute had never been interpreted as so doing. Michigan, 40 F.3d at 823. By 

contrast, there is no question that the ACA, at least in part, applies to the States. The only issue 

before us is whether the term “group health plan” is meant to encompass health plans offered by 

state employers to their employees. A close and careful reading of the ACA and its crossreferences compels an answer in the affirmative. Congress’s plain statement that the Program 

applies to the States can be found in the series of cross-references discussed supra. We therefore 

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conclude that Ohio’s statutory challenge fails, and the Transitional Reinsurance Program applies 

to the State of Ohio. 

C. Ohio’s Constitutional Claims 

Ohio next argues that applying the Transitional Reinsurance Program to the States 

violates the Tenth Amendment to the United States Constitution. Specifically, Ohio objects to 

application of the Program under both the anti-commandeering and intergovernmental tax 

immunity doctrines. Ohio is concerned that the Program “requires an extraordinarily expansive, 

uncabined theory of federal power . . . under which federal politicians would be free to try to 

accrue political support through any type of corporate welfare scheme imaginable and then shirk 

accountability for total costs by ordering the States to collect money from their own citizens 

. . . .” Appellants Br. at 53. Further, Ohio argues, instead of aiding Ohio or its employees in 

connection with the State’s money, the program “transfers money to private companies (that by 

definition do not insure the State employees) and [] takes for the federal general fund dollars that 

by law cannot be used for the purposes of the federal program under which the tax arises.” Id. 

We find Ohio’s alarmist posturing unpersuasive because the Program does not commandeer 

Ohio’s legislative authority nor does it violate any remaining vestiges of the intergovernmental 

tax immunity doctrine. 

1. Ohio’s Anti-commandeering Claim is Foreclosed by Garcia v. San 

Antonio Metropolitan Transportation Authority. 

Ohio first argues that payments to Transitional Reinsurance Program violate the Tenth 

Amendment because the Program commandeers Ohio’s regulatory apparatus. The Supreme 

Court in Garcia v. San Antonio Metropolitan Transit Authority faced the question of whether 

there existed a Tenth Amendment violation where a state governmental employer was required 

to meet the overtime and minimum-wage requirements of the Fair Labor Standards Act (FLSA). 

469 U.S. 528, 530 (1985). The Court found no violation because “Congress’ action in affording 

SAMTA employees the protections of the wage and hour provisions of the FLSA contravened no 

affirmative limit on Congress’ power under the Commerce Clause.” Id. at 555–56. The Garcia

Court held that the Tenth Amendment did not prohibit Congress from regulating state employers 

in the same manner that it regulates private-sector employers. We have similarly held that 

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Congress may enact “generally applicable laws that regulate state activities in the same manner 

as private conduct” and not violate the Tenth Amendment. See EEOC v. Ky. Ret. Sys., 16 F. 

App’x 443, 452 (6th Cir. 2001). 

 Ohio’s principal argument that the Program commandeers the State’s regulatory 

apparatus relies almost exclusively on Printz v. United States, 521 U.S. 898, 930 (1997), and 

New York v. United States, 505 U.S. 144, 169 (1992). In Printz, a federal firearms law required 

that the chief law-enforcement officer in each local jurisdiction conduct certain checks to ensure 

compliance with the statute until a national background-check system was operative. Printz, 

521 U.S. at 902. In the 1992 New York case, the Federal Government mandated that the States 

provide for disposal of certain low-level radioactive waste, and in some instances take title to and 

become liable for all damages caused by a state’s failure promptly to take possession of said 

waste. New York, 505 U.S. at 150–51. The Supreme Court struck down both laws on the 

grounds that Congress impermissibly commandeered the legislative process of the States. 

 Neither Printz nor New York is applicable in this case. The congressional action in both 

cases required that certain state actors engage in specific conduct in order to comply with the 

statute. As we have previously held, there exists an important distinction in the Supreme Court’s 

anti-commandeering cases between “generally applicable laws that regulate state activities in the 

same manner as private conduct,” which have been held constitutional, and laws “that seek to 

control or influence the manner in which the States regulate private conduct,” which are 

unconstitutional. See Ky. Ret. Sys., 16 F. App’x at 452. See also South Carolina v. Baker, 

485 U.S. 505, 514 (1988) (holding that a federal tax law was constitutional where it “regulates 

state activities” and does not “seek to control or influence the manner in which States regulate 

private parties”); Reno v. Condon, 528 U.S. 141, 151 (2000) (upholding a federal law because it 

“does not require the States in their sovereign capacity to regulate their own citizens.”). We 

cannot conclude that the Program seeks to control or influence the manner in which a state 

regulates private parties. Instead, it regulates the States directly by requiring participation in the 

Program in the exact same manner that it requires participation by private employers. This is a 

classic case of congressional action that is constitutionally permissible under the Tenth 

Amendment, and we therefore find Ohio’s anti-commandeering arguments unpersuasive. 

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As the district court so aptly noted, “[t]he Affordable Care Act requires Ohio and its 

instrumentalities and political subdivisions to comply with a federal regulatory program, not to 

implement one.” Ohio, 154 F. Supp. 3d at 659. We therefore conclude that the Federal 

Government has not commandeered the States by requiring participation in the Transitional 

Reinsurance Program in the same manner that it requires participation by private employers. 

2. The Program Does Not Violate the Intergovernmental Tax Immunity Doctrine 

Ohio’s final argument is that the Transitional Reinsurance Program is a violation of the 

intergovernmental tax immunity doctrine, the concept that the federal and state governments 

should not tax each other. See New York v. United States, 326 U.S. 572, 576 (1946) (“[T]he fear 

that one government may cripple or obstruct the operations of the other early led to the 

assumption that there was a reciprocal immunity of the instrumentalities of each from taxation by 

the other.”). The district court concluded that the Program does not run afoul of the 

intergovernmental tax immunity doctrine because that doctrine “now protects only against 

discriminatory taxes levied directly on the states,” and that “the Transitional Reinsurance 

Program imposes reinsurance contributions on private-sector employers and state and local 

government employers equally—i.e., non-discriminatorily.” Ohio, 154 F. Supp. 3d at 659. 

We agree. 

 In the 1946 New York v. United States case, the Supreme Court upheld a federal tax 

imposed on the State of New York’s bottling and sale of mineral water. New York, 326 U.S. at 

573–74. Under the law at the time, public instrumentalities of the States were immune from 

taxation provided they were performing a “governmental function” and not a business or 

proprietary function. Id. at 579–80. The New York Court abandoned that rigid distinction, 

though no majority of the justices could agree upon a single rationale, with two justices agreeing 

that any non-discriminatory tax imposed upon a state was constitutional and four justices finding 

that a non-discriminatory tax could be unconstitutional if it “interfere[s] unduly with the State’s 

performance of its sovereign functions of government.” Id. at 587–89. The Supreme Court has 

only occasionally subsequently addressed the intergovernmental tax immunity doctrine. 

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 A tax against the States will withstand a Tenth Amendment challenge if it: (1) does not 

discriminate against the States; and (2) can be remedied through the political process. See 

Massachusetts v. U.S., 435 U.S. 444, 456 (1978) (“the political process is uniquely adapted to 

accommodating the competing demands ‘for national revenue, on the one hand, and for 

reasonable scope for the independence of state action on the other.’”(citation omitted)); Baker, 

485 U.S. at 526 n.15 (“the threat of destroying another government can be realized only if the 

taxing government is willing to impose taxes that will also destroy itself or its constituents.”). 

See also W. Lynn Creamery, Inc. v. Healy, 512 U.S. 186, 200 n.17 (1994) (noting that “in the 

field of intergovernmental taxation . . . nondiscrimination . . . plays a central role in setting the 

boundary between the permissible and the impermissible.”). 

Ohio concedes that “the immunity doctrine has been narrowed over the years, and it is no 

longer understood to forbid indirect taxes on items such as state employee salaries or income 

from state contracts.” Appellants Br. at 56 (citing Baker, 485 U.S. at 520–23). Ohio urges us to 

examine closely the plurality opinion delivered in Massachusetts v. United States, which 

recognized “the limitation the existence of the States constitutionally imposes on the national 

taxing power.” 435 U.S. at 459. However, we conclude that reliance on Massachusetts is 

misplaced, as that Court had “no occasion to decide either the present vitality of the doctrine of 

state tax immunity or the conditions under which it might be invoked.” Id. at 454. Indeed, the 

Massachusetts Court upheld a federal fee that was applied to state-owned property. Id. at 446. 

Michigan v. United States, the very case upon which Ohio so heavily relies for its statutory 

argument, speaks directly to the question of immunity. See Mich. v. U.S., 40 F.3d at 822 (“The 

broad constitutional immunity from federal taxation once thought to be enjoyed by states . . . has 

been severely eroded . . . and several years ago the Supreme Court suggested that it is now an 

open question whether there is ‘any’ extent ‘to which States are currently immune from direct 

non-discriminatory federal taxation.’” (quoting Baker, 485 U.S. at 518 n.11)). As this court 

noted in Michigan, “today’s Supreme Court would say that Congress is free to impose a nondiscriminatory tax” on a state government. Id. at 823. 

At least one of our sister circuits agrees with the district court’s conclusion that any 

intergovernmental immunity analysis requires examination of discriminatory application. The 

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Seventh Circuit in Travis v. Reno, 163 F.3d 1000 (7th Cir. 1998), upheld a federal statute that 

levied upon the States certain fines for their failure to comply with its strictures. In upholding 

the statute, the court noted that: 

Gradually intergovernmental immunity turned into a rule of nondiscrimination, 

under which the governmental body’s protection is vicarious: one government 

may tax (or regulate) another’s trading partners only to the extent it imposes 

equivalent burdens on those who do business with private citizens. Neutrality 

between governmental and private spheres is a principal ground on which the 

Supreme Court has held that states may be subjected to regulation when they 

participate in the economic marketplace—for example, by hiring workers covered 

by the Fair Labor Standards Act. So long as public market participants are treated 

the same as private ones, they enjoy the protection the latter have been able to 

secure from the legislature; and as Congress is not about to destroy private 

industry (think what that would do to the tax base!) it can not hobble the states 

either. 

163 F.3d at 1002–03 (citations omitted). While the Seventh Circuit was not directly confronted 

with a challenge to the intergovernmental tax immunity doctrine, we find its logic persuasive, 

and in line with our conclusion in Michigan. Whether the intergovernmental tax immunity 

doctrine is one which the Supreme Court would acknowledge as having any force today is an 

open question. We thus agree with the district court that “even under the State’s erroneous view 

of the continued validity of the intergovernmental tax immunity doctrine, the Transitional 

Reinsurance Program remains constitutional.” Ohio, 154 F. Supp. 3d at 665. 

We conclude that the tax imposed under the Transitional Reinsurance Program is a nondiscriminatory tax applied evenly to public and private group health plans. Application of the 

Program to the State of Ohio does not violate the intergovernmental tax immunity doctrine. 

III. CONCLUSION 

 Because the Transitional Reinsurance Program was intended to apply to the State of 

Ohio, and because its application does not run afoul of the important principles of federalism or 

the Tenth Amendment to the United States Constitution, we AFFIRM the grant of the United 

States’s motion to dismiss and the denial of Ohio’s motion for summary judgment. 

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