United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 25, 2014 Decided July 22, 2014

No. 14-5018

JACQUELINE HALBIG, ET AL.,

APPELLANTS

v.

SYLVIA MATHEWS BURWELL, IN HER OFFICIAL CAPACITY AS 

U.S. SECRETARY OF HEALTH AND HUMAN SERVICES, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:13-cv-00623)

Michael A. Carvin argued the cause for appellants. With 

him on the briefs were Yaakov M. Roth and Jonathan Berry. 

Rebecca A. Beynon, E. Scott Pruitt, Attorney General, 

Office of the Attorney General for the State of Oklahoma, 

Patrick R. Wyrick, Solicitor General, Luther Strange, 

Attorney General, Office of the Attorney General for the State 

of Alabama, Sam Olens, Attorney General, Office of the 

Attorney General for the State of Georgia, Patrick Morrisey, 

Attorney General, Office of the Attorney General for the State 

of West Virginia, Jon Bruning, Attorney General, Office of 

the Attorney General for the State of Nebraska, and Alan 

Wilson, Attorney General, Office of the Attorney General for 
2

the State of South Carolina were on the brief for amici curiae

Consumer’s Research, et al. 

C. Boyden Gray, Adam J. White, and Adam R.F. 

Gustafson were on the brief for amicus curiae The Galen 

Institute in support of appellants. 

Charles J. Cooper, David H. Thompson, Howard C. 

Nielson, and Michael E. Roman were on the brief for amici 

curiae Senator John Cornyn, et al. in support of appellants. 

John R. Woodrum was on the brief for amicus curiae 

National Federation of Independent Business Legal Center in 

support of appellants.

Bert W. Rein, William S. Consovoy, John M. Connolly, 

and Ilya Shapiro were on the brief for amici curiae Pacific 

Research Institute, et al. in support of appellants. 

Derek Schmidt, Attorney General, Office of the Attorney 

General for the State of Kansas, Jeffrey A. Chanay, Deputy 

Attorney General, Stephen R. McAllister, Solicitor General, 

Bryan C. Clark, Assistant Solicitor General, Bill Schuette, 

Attorney General, Office of the Attorney General for the State 

of Michigan, and Jon Bruning, Attorney General, Office of 

the Attorney General for the State of Nebraska, were on the 

brief for amici curiae States of Kansas, et al. in support of 

appellants. 

Andrew M. Grossman was on the brief for amici curiae 

Jonathan Adler, et al. in support of appellants. 

Stuart F. Delery, Assistant Attorney General, U.S. 

Department of Justice, argued the cause for appellees. With 

him on the brief were Ronald C. Machen, Jr., U.S. Attorney, 
3

Beth S. Brinkmann, Deputy Assistant Attorney General, and 

Mark B. Stern and Alisa B. Klein, Attorneys.

Martha Jane Perkins, Kelly Bagby, Iris Y. Gonzalez, and 

Michael Schuster were on the brief for amici curiae AARP 

and National Health Law Program in support of appellees. 

Mary P. Rouvelas was on the brief for amici curiae The 

American Cancer Society, et al. in support of appellees.

H. Guy Collier and Ankur J. Goel were on the brief for 

amici curiae Public Health Deans, Chairs, and Faculty in 

support of appellees.

Elizabeth B. Wydra and Simon Lazarus were on the brief 

for amici curiae Members of Congress and State Legislatures 

in support of appellees. 

Dominic F. Perella, Sean Marotta, and Melinda Reid 

Hatton were on the brief for amicus curiae The American 

Hospital Association in support of appellees. 

Andrew J. Pincus and Brian D. Netter were on the brief 

for amicus curiae America’s Health Insurance Plans in 

support of appellees.

Matthew S. Hellman and Matthew E. Price were on the 

brief for amici curiae Economic Scholars in support of 

appellees.

Robert Weiner and Murad Hussain were on the brief for 

amicus curiae Families USA in support of appellees.

Before: GRIFFITH, Circuit Judge, and EDWARDS and 

RANDOLPH, Senior Circuit Judges.
4

Opinion for the Court filed by Circuit Judge GRIFFITH.

Concurring opinion filed by Senior Circuit Judge 

RANDOLPH.

Dissenting opinion filed by Senior Circuit Judge

EDWARDS.

GRIFFITH, Circuit Judge: Section 36B of the Internal 

Revenue Code, enacted as part of the Patient Protection and 

Affordable Care Act (ACA or the Act), makes tax credits 

available as a form of subsidy to individuals who purchase 

health insurance through marketplaces—known as “American 

Health Benefit Exchanges,” or “Exchanges” for short—that 

are “established by the State under section 1311” of the Act. 

26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision 

authorizes tax credits for insurance purchased on an Exchange 

established by one of the fifty states or the District of 

Columbia. See 42 U.S.C. § 18024(d). But the Internal 

Revenue Service has interpreted section 36B broadly to 

authorize the subsidy also for insurance purchased on an 

Exchange established by the federal government under 

section 1321 of the Act. See 26 C.F.R. § 1.36B-2(a)(1) 

(hereinafter “IRS Rule”). 

Appellants are a group of individuals and employers 

residing in states that did not establish Exchanges. For reasons 

we explain more fully below, the IRS’s interpretation of 

section 36B makes them subject to certain penalties under the 

ACA that they would rather not face. Believing that the IRS’s 

interpretation is inconsistent with section 36B, appellants

challenge the regulation under the Administrative Procedure 

Act (APA), alleging that it is not “in accordance with law.” 5 

U.S.C. § 706(2)(A). 
5

On cross-motions for summary judgment, the district 

court rejected that challenge, granting the government’s 

motion and denying appellants’. See Halbig v. Sebelius, No. 

13 Civ. 623 (PLF), 2014 WL 129023 (D.D.C. Jan. 15, 2014). 

After resolving several threshold issues related to its 

jurisdiction, the district court held that the ACA’s text, 

structure, purpose, and legislative history make “clear that 

Congress intended to make premium tax credits available on 

both state-run and federally-facilitated Exchanges.” Id. at *18. 

Furthermore, the court held that even if the ACA were 

ambiguous, the IRS’s regulation would represent a 

permissible construction entitled to deference under Chevron 

U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 

U.S. 837 (1984).

Appellants timely appealed the district court’s orders, and 

we have jurisdiction under 28 U.S.C. § 1291. Our review of 

the orders is de novo, and “[o]n an independent review of the 

record, we will uphold an agency action unless we find it to 

be ‘arbitrary, capricious, an abuse of discretion, or otherwise 

not in accordance with law.’” Holland v. Nat’l Mining Ass’n, 

309 F.3d 808, 814 (D.C. Cir. 2002) (quoting 5 U.S.C. 

§ 706(2)(A)). Because we conclude that the ACA 

unambiguously restricts the section 36B subsidy to insurance 

purchased on Exchanges “established by the State,” we 

reverse the district court and vacate the IRS’s regulation.

I

Congress enacted the Patient Protection and Affordable 

Care Act in 2010 “to increase the number of Americans 

covered by health insurance and decrease the cost of health 

care.” Nat’l Fed’n of Indep. Bus. v. Sebelius (NFIB), 132 S. 

Ct. 2566, 2580 (2012). The ACA pursues these goals through 
6

a complex network of interconnected policies focused 

primarily on helping individuals who do not receive coverage 

through an employer or government program to purchase 

affordable insurance directly. Central to this effort are the 

Exchanges. 42 U.S.C. § 18031(b)(1). Exchanges are 

“governmental agenc[ies] or nonprofit entit[ies]” that serve as 

both gatekeepers and gateways to health insurance coverage.

See id. § 18031(d)(1). Among their many functions as 

gatekeepers, Exchanges determine which health plans satisfy 

federal and state standards, and they operate websites that 

allow individuals and employers to enroll in those that do. See 

id. § 18031(b)(1), (d)(1)-(d)(4). Section 1311 of the ACA 

delegates primary responsibility for establishing Exchanges to 

individual states. See id. § 18031(b)(1) (providing that “[e]ach 

State shall, not later than January 1, 2014, establish an 

American Health Benefit Exchange (referred to in this title as

an ‘Exchange’) for the State”). However, because Congress 

cannot require states to implement federal laws, see Printz v. 

United States, 521 U.S. 898, 904-05, 935 (1997), if a state 

refuses or is unable to set up an Exchange, section 1321 

provides that the federal government, through the Secretary of 

Health and Human Services (HHS), “shall . . . establish and 

operate such Exchange within the State.” 42 U.S.C.

§ 18041(c)(1). As of today, only fourteen states and the 

District of Columbia have established Exchanges. The federal 

government has established Exchanges in the remaining 

thirty-six states, in some cases with state assistance but in 

most cases not. See Richard Cauchi, State Actions To Address 

Health Insurance Exchanges, NAT’L CONFERENCE OF STATE 

LEGISLATURES (May 9, 2014), 

http://www.ncsl.org/research/health/state-actions-toimplement-the-health-benefit.aspx. 

Under section 36B, Exchanges also serve as the gateway 

to the refundable tax credits through which the ACA 
7

subsidizes health insurance. See 26 U.S.C. § 36B(a). 

Generally speaking, section 36B authorizes credits for 

“applicable taxpayer[s],” id., defined as those with household 

incomes between 100 and 400 percent of the federal poverty 

line, id. § 36B(c)(1)(A). But section 36B’s formula for 

calculating the credit works further limits on who may receive 

the subsidy. According to that formula, the credit is to equal 

the sum of the “premium assistance amounts” for each 

“coverage month.” Id. § 36B(b)(1). The “premium assistance 

amount” is based on the cost of a “qualified health plan . . . 

enrolled in through an Exchange established by the State 

under [section] 1311 of the [ACA].” Id. § 36B(b)(2); see also 

42 U.S.C. §§ 18021(a)(1), 18031(c)(1) (establishing 

requirements for “qualified health plans”). Likewise, a

“coverage month” is a month for which, “as of the first day of 

such month the taxpayer . . . is covered by a qualified health 

plan . . . that was enrolled in through an Exchange established 

by the State under section 1311 of the [ACA].” 26 U.S.C.

§ 36B(c)(2)(A)(i). In other words, the tax credit is available 

only to subsidize the purchase of insurance on an “Exchange 

established by the State under section 1311 of the [ACA].”

But, in a regulation promulgated on May 23, 2012, the 

IRS interpreted section 36B to allow credits for insurance

purchased on either a state- or federally-established 

Exchange. Specifically, the regulation provided that a

taxpayer may receive a tax credit if he “is enrolled in one or 

more qualified health plans through an Exchange,” 26 C.F.R. 

§ 1.36B-2(a)(1), which the IRS defined as “an Exchange 

serving the individual market for qualified individuals . . . , 

regardless of whether the Exchange is established and 

operated by a State (including a regional Exchange or 

subsidiary Exchange) or by HHS.” 45 C.F.R. § 155.20 

(emphasis added); see 26 C.F.R. § 1.36B-1(k) (incorporating 

the definition in 45 C.F.R. § 155.20 by reference). In 
8

promulgating this broader rule, the IRS acknowledged that 

“[c]ommentators disagreed on whether the language in 

section 36B(b)(2)(A) limits the availability of the premium 

tax credit only to taxpayers who enroll in qualified health 

plans on State Exchanges,” but asserted without elaboration

that “[t]he statutory language of section 36B and other 

provisions of the [ACA],” as well as “the relevant legislative 

history,” supported its view. Health Insurance Premium Tax 

Credit, 77 Fed. Reg. 30,377, 30,378 (May 23, 2012).

This broader interpretation has major ramifications. By 

making credits more widely available, the IRS Rule gives the 

individual and employer mandates—key provisions of the 

ACA—broader effect than they would have if credits were 

limited to state-established Exchanges. The individual 

mandate requires individuals to maintain “minimum essential 

coverage” and, in general, enforces that requirement with a 

penalty. See 26 U.S.C. § 5000A(a)-(b). The penalty does not 

apply, however, to individuals for whom the annual cost of 

the cheapest available coverage, less any tax credits, would 

exceed eight percent of their projected household income. See 

id. § 5000A(e)(1)(A)-(B). By some estimates, credits will

determine on which side of the eight-percent threshold 

millions of individuals fall. See Br. of Economic Scholars in 

Support of Appellees 18. Thus, by making tax credits 

available in the 36 states with federal Exchanges, the IRS 

Rule significantly increases the number of people who must 

purchase health insurance or face a penalty. 

The IRS Rule affects the employer mandate in a similar 

way. Like the individual mandate, the employer mandate uses 

the threat of penalties to induce large employers—defined as 

those with at least 50 employees, see 26 U.S.C. 

§ 4980H(c)(2)(A)—to provide their full-time employees with 

health insurance. See generally id. § 4980H(a). Specifically, 
9

the ACA penalizes any large employer who fails to offer its

full-time employees suitable coverage if one or more of those

employees “enroll[s] . . . in a qualified health plan with 

respect to which an applicable tax credit . . . is allowed or paid 

with respect to the employee.” Id. § 4980H(a)(2); see also id.

§ 4980H(b) (linking another penalty on employers to 

employees’ receipt of tax credits). Thus, even more than with 

the individual mandate, the employer mandate’s penalties

hinge on the availability of credits. If credits were unavailable 

in states with federal Exchanges, employers there would face 

no penalties for failing to offer coverage. The IRS Rule has 

the opposite effect: by allowing credits in such states, it 

exposes employers there to penalties and thereby gives the 

employer mandate broader reach. 

II

Before we can turn to the merits of the parties’ dispute, 

we must first address the government’s argument that all 

appellants lack standing and that, even if they have standing, 

the APA does not provide them with a cause of action to 

challenge the IRS Rule. Because we find that appellant David 

Klemencic has standing and a cause of action under the APA, 

we do not reach the issue of our jurisdiction over the 

remaining appellants’ claims. See Mountain States Legal 

Found. v. Glickman, 92 F.3d 1228, 1232 (D.C. Cir. 1996)

(explaining that as long as one plaintiff has standing for a

claim, “we need not consider the standing of the other 

plaintiffs to raise that claim”).

A

The “‘irreducible constitutional minimum’” a plaintiff 

must show to establish standing is (1) an injury in fact 

(2) fairly traceable to the alleged conduct of the defendant 
10

(3) that is likely to be redressed by the relief the plaintiff 

seeks. Sprint Commc’ns Co. v. APCC Servs., Inc., 554 U.S. 

269, 273-74 (2008) (quoting Lujan v. Defenders of Wildlife, 

405 U.S. 555, 560-61 (1992)). The district court determined 

that at least one of the appellants, David Klemencic, has 

standing. Klemencic resides in West Virginia, a state that did 

not establish its own Exchange, and expects to earn 

approximately $20,000 this year.1 He avers that he does not 

wish to purchase health insurance and that, but for federal 

credits, he would be exempt from the individual mandate 

because the unsubsidized cost of coverage would exceed eight 

percent of his income. The availability of credits on West 

Virginia’s federal Exchange therefore confronts Klemencic 

with a choice he’d rather avoid: purchase health insurance at a 

subsidized cost of less than $21 per year or pay a somewhat 

greater tax penalty.

The government primarily questions whether Klemencic 

has suffered an injury in fact. An injury in fact is “a concrete 

and particularized invasion of a legally protected interest.” 

Sprint Commc’ns Co., 554 U.S. at 273 (internal quotation 

marks omitted). The government characterizes Klemencic’s 

injury as purely ideological and hence neither concrete nor 

particularized. But, although Klemencic admits to being at 

 

1 Although West Virginia actually passed legislation 

authorizing the establishment of an Exchange, see W. VA. CODE

§ 33-16G-1 et seq., it subsequently decided to allow the federal 

government to establish the Exchange, in partnership with the state, 

due to cost concerns, see Nat’l Conference of State Legislatures: 

Health Insurance Exchanges or Marketplaces: State Action—May 

2014, http://www.ncsl.org/Portals/1/Documents/Health/Health_

Insurance_Exchanges_State_Profiles.pdf#page=49 (last visited 

June 12, 2014). 
11

least partly motivated by opposition to “government 

handouts,” he has established that, by making subsidies 

available in West Virginia, the IRS Rule will have 

quantifiable economic consequences particular to him. See 

Clapper v. Amnesty Int’l USA, 133 S. Ct. 1138, 1147 (2013) 

(explaining that a “threatened injury” that is “certainly 

impending” may “constitute injury in fact” (emphasis and 

internal quotation marks omitted)). Those consequences may 

be small, but even an “‘identifiable trifle’” of harm may

establish standing. Chevron Natural Gas v. FERC, 199 F. 

App’x 2, 4 (D.C. Cir. 2006) (quoting United States v. Students 

Challenging Regulatory Agency Procedures, 412 U.S. 669, 

689 n.14 (1973)); see Bob Jones Univ. v. United States, 461 

U.S. 574, 581-82 (1983) (noting that Bob Jones University 

sued for a tax refund of $21.00). Klemencic thus satisfies the 

requirement of establishing an injury in fact, and because that 

injury is traceable to the IRS Rule and redressable through a 

judicial decision invalidating the rule, we find that he has 

standing to challenge the rule. We therefore proceed to 

consider whether Klemencic may mount his challenge under 

the APA.

B

The APA provides a cause of action to challenge final 

agency action “for which there is no other adequate remedy in 

a court.” 5 U.S.C. § 704. The government argues that even if 

Klemencic has standing to challenge the IRS Rule, he cannot 

do so under the APA because he has an adequate alternative 

remedy in the form of a tax-refund suit: Klemencic could 

violate the individual mandate, pay the penalty, and then sue 

for a refund, raising the same arguments he makes here. See 

28 U.S.C. § 1346(a)(1); see also 26 U.S.C. § 7422(a). Such a 

remedy is adequate, the government contends, because if 
12

Klemencic were successful, the suit would make him 

financially whole. 

The APA “embodies the basic presumption of judicial 

review” of agency action. Abbott Labs. v. Gardner, 387 U.S. 

136, 140 (1967). Therefore, in determining whether an 

alternative remedy is adequate, we must give the APA’s 

“generous review provisions” a “hospitable interpretation,”

such that “only upon a showing of clear and convincing 

evidence of a contrary legislative intent should the courts 

restrict access to judicial review.” Id. at 141 (internal 

quotation marks omitted); see Garcia v. Vilsack, 563 F.3d 

519, 523 (D.C. Cir. 2009). Under this standard, “[a]n 

alternative remedy will not be adequate . . . if the remedy 

offers only ‘doubtful and limited relief.’” Garcia, 563 F.3d at 

522 (quoting Bowen v. Massachusetts, 487 U.S. 879, 901 

(1988)). Although “the alternative remedy need not provide 

relief identical to relief under the APA,” it must “offer[] relief 

of the ‘same genre.’” Id. at 522 (quoting El Rio Santa Cruz 

Neighborhood Health Ctr. v. U.S. Dep’t of Health & Human 

Servs., 396 F.3d 1265, 1272 (D.C. Cir. 2005)).

In arguing that a tax refund suit provides an adequate 

alternative remedy, the government emphasizes Klemencic’s 

ability to recover any assessed overpayment, plus interest. But 

that backward-looking relief differs in kind from the 

prospective relief Klemencic could obtain under the APA. See 

Bowen, 487 U.S. at 904-05 (rejecting as “unprecedented” the 

government’s argument that a suit for monetary damages is an 

adequate alternative to prospective relief under the APA). 

Specifically, requiring Klemencic to proceed via refund suit 

would deprive him of the opportunity to obtain a “certificate 

of exemption.” See 45 C.F.R. § 155.605(g)(2). Such 

certificates are a form of safe harbor, allowing an individual 

to obtain an exemption from the mandate’s penalty on the 
13

basis of projected income, “notwithstanding any [subsequent] 

change in an individual’s circumstances.” Id.

§ 155.605(g)(2)(vi). Unlike the “prospective[]” assurance 

such certificates offer, id., a refund suit would require 

Klemencic to violate the law as it now stands, pay a penalty, 

and only then challenge the assessment of the penalty for that 

previous year based on his actual income. And even if 

Klemencic were to prevail, his relief—financial restitution—

would be backwards looking, meaning that Klemencic would 

have to repeat the cycle the following year. The government 

offers no suggestion that he could obtain a certificate of 

exemption through a refund action. 

Furthermore, it is not clear that Klemencic could obtain 

any prospective relief through a refund action, let alone that 

which he seeks under his APA claim—namely, a declaration 

that the IRS Rule is invalid and an injunction barring its 

implementation. As we explained in Cohen v. United States, 

the provision authorizing refund suits “does not, at least 

explicitly, allow for prospective relief.” 650 F.3d 717, 732 

(D.C. Cir. 2011) (en banc); see 26 U.S.C. § 7422(a) (setting

forth requirements applicable to any “suit or proceeding . . . 

for the recovery . . . of any penalty claimed to have been 

collected without authority” (emphasis added)). And the 

government here does not suggest that it implicitly allows 

such relief, maintaining instead the studied silence as to the 

availability of non-monetary relief that, in Cohen, we 

interpreted as a concession of the limited nature of the 

remedies a refund suit under section 7422 offers. See Cohen, 

650 F.3d at 732. (noting that, by being “agnostic concerning 

the availability of broad equitable remedies as part of a refund 

suit,” the IRS “unknowingly concedes” that an action under 

section 7422 does not offer prospective relief). We must 

therefore conclude that a tax refund suit is inadequate as an 

alternative remedy: it is “doubtful” that it offers prospective 
14

relief at all, and the monetary relief it does offer is clearly not 

“of the same genre” as the relief available to appellants under 

the APA. See Garcia, 563 F.3d at 522 (internal quotation 

marks omitted). Because a tax refund suit thus offers 

Klemencic only “doubtful and limited relief,” Bowen, 487 

U.S. at 901, we hold that the APA provides him with a cause 

of action to challenge the IRS Rule and turn to the merits of 

his claim.

III

On the merits, this case requires us to determine whether 

the ACA permits the IRS to provide tax credits for insurance 

purchased through federal Exchanges. To make this 

determination, we begin by asking “whether Congress has 

directly spoken to the precise question at issue,” for if it has, 

we must give effect to its unambiguously expressed intent.

Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 

837, 842-43 (1984). The text of section 36B is only the 

starting point of this analysis. That provision is but one piece 

of a vast, complex statutory scheme, and we must consider it 

both on its own and in relation to the ACA’s interconnected

provisions and overall structure so as to interpret the Act, if 

possible, “as a symmetrical and coherent scheme.” See FDA 

v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 

(2000) (internal quotation marks omitted); Wolf Run Mining

Co. v. Fed. Mine Safety & Health Review Comm’n, 659 F.3d 

1197, 1200 (D.C. Cir. 2011). 

Although both appellants and the government argue that 

the ACA, read in its totality, evinces clear congressional 

intent, they dispute what that intent actually is. Appellants 

argue that if taxpayers can receive credits only for plans 

enrolled in “through an Exchange established by the State 

under section 1311 of the [ACA],” then the IRS clearly 
15

cannot give credits to taxpayers who purchased insurance on 

an Exchange established by the federal government. After all, 

the federal government is not a “State,” see 42 U.S.C. 

§ 18024(d) (defining “State” to “mean[] each of the 50 States 

and the District of Columbia”), and its authority to establish 

Exchanges appears in section 1321 rather than section 1311, 

see id. § 18041(c)(1). The government counters that 

appellants take a blinkered view of the ACA and that sections 

1311 and 1321 of the Act establish complete equivalence 

between state and federal Exchanges, such that when the 

federal government establishes an Exchange, it does so 

standing in the state’s shoes. Furthermore, the government 

argues, whereas appellants’ construction of section 36B 

renders other provisions of the ACA absurd, its own view 

brings coherence to the statute and better promotes the

purpose of the Act.

We conclude that appellants have the better of the 

argument: a federal Exchange is not an “Exchange established 

by the State,” and section 36B does not authorize the IRS to 

provide tax credits for insurance purchased on federal 

Exchanges. We reach this conclusion by the following path: 

First, we examine section 36B in light of sections 1311 and 

1321, which authorize the establishment of state and federal 

Exchanges, respectively, and conclude that section 36B 

plainly distinguishes Exchanges established by states from 

those established by the federal government. We then 

consider the government’s arguments that this construction 

generates absurd results but find that it does not render other 

provisions of the ACA unworkable, let alone so unreasonable 

as to justify disregarding section 36B’s plain meaning. 

Finally, turning to the ACA’s purpose and legislative history, 

we find that the government again comes up short in its 

efforts to overcome the statutory text. Its appeals to the 

ACA’s broad aims do not demonstrate that Congress 
16

manifestly meant something other than what section 36B 

says. 

A

The crux of this case is whether an Exchange established 

by the federal government is an “Exchange established by the 

State under section 1311 of the [ACA].” We therefore begin

with the provisions authorizing states and the federal 

government to establish Exchanges. Section 1311 provides 

that states “shall” establish Exchanges. 42 U.S.C.

§ 18031(b)(1). But, as the parties agree, despite its seemingly 

mandatory language, section 1311 more cajoles than 

commands. A state is not literally required to establish an 

Exchange; the ACA merely encourages it to do so. And if a 

state elects not to (or is unable to), such that it “will not have 

any required Exchange operational by January 1, 2014,” 

section 1321 directs the federal government, through the 

Secretary of Health and Human Services, to “establish and 

operate such Exchange within the State.” Id. § 18041(c)(1) 

(emphasis added).

The phrase “such Exchange” has twofold significance. 

First, the word “such”—meaning “aforementioned,” see 

BLACK’S LAW DICTIONARY 1473 (8th ed. 2004); WEBSTER’S 

THIRD INT’L DICTIONARY 2283 (1981)—signifies that the 

Exchange the Secretary must establish is the “required 

Exchange” that the state failed to establish. In other words, 

“such” conveys what a federal Exchange is: the equivalent of 

the Exchange a state would have established had it elected to 

do so. The meaning of “Exchange” in the ACA reinforces and 

builds on this sense. The ACA defines an “Exchange” as “an 

American Health Benefit Exchange established under [section 

1311 of the ACA].” 42 U.S.C. § 300gg-91(d)(21). If we 

import that definition into the text of section 1321, the 
17

provision directs the Secretary to “establish . . . such 

American Health Benefit Exchange established under [section 

1311 of the ACA] within the State.” This suggests not only 

that the Secretary is to establish the type of exchange 

described in section 1311, but also that when she does so, she 

acts under section 1311, even though her authority appears in 

section 1321. Thus, section 1321 creates equivalence between 

state and federal Exchanges in two respects: in terms of what 

they are and the statutory authority under which they are 

established.

The problem confronting the IRS Rule is that subsidies 

also turn on a third attribute of Exchanges: who established 

them. Under section 36B, subsidies are available only for 

plans “enrolled in through an Exchange established by the 

State under section 1311 of the [ACA].” 26 U.S.C. 

§ 36B(c)(2)(A)(i) (emphasis added); see also id.

§ 36B(b)(2)(A). Of the three elements of that provision—

(1) an Exchange (2) established by the State (3) under section 

1311—federal Exchanges satisfy only two: they are 

Exchanges established under section 1311. Nothing in section 

1321 deems federally-established Exchanges to be 

“Exchange[s] established by the State.” This omission is 

particularly significant since Congress knew how to provide 

that a non-state entity should be treated as if it were a state

when it sets up an Exchange. In a nearby section, the ACA 

provides that a U.S. territory that “elects . . . to establish an 

Exchange . . . shall be treated as a State.”242 U.S.C. 

§ 18043(a)(1). The absence of similar language in section 

 

2

Specifically, the ACA permits territories to be treated as states 

for the limited purposes of sections 1311, 1312, and 1313. See 42 

U.S.C. § 18043(a). 
18

1321 suggests that even though the federal government may 

establish an Exchange “within the State,” it does not in fact 

stand in the state’s shoes when doing so. See NFIB, 132 S. Ct. 

at 2583 (“Where Congress uses certain language in one part 

of a statute and different language in another, it is generally 

presumed that Congress acts intentionally.” (citing Russello v. 

United States, 464 U.S. 16, 23 (1983))).

The dissent attempts to supply this missing equivalency

by pointing to section 1311(d)(1), which provides: “An 

Exchange shall be a governmental agency or nonprofit entity 

that is established by a State.” 42 U.S.C. § 18031(d)(1). 

According to the dissent, (d)(1) means that an Exchange 

established under section 1311 is, by definition, established 

by a state. Therefore, the dissent argues, because federal 

Exchanges are established under section 1311, they too, by 

definition, are established by a state.

The premise that (d)(1) is definitional, however, does not 

survive examination of (d)(1)’s context and the ACA’s

structure. The other provisions of section 1311(d) are 

operational requirements, setting forth what Exchanges must 

(or, in some cases, may) do.3See generally 42 U.S.C. 

§ 18031(d)(2)-(7) (listing “[r]equirements”). Read in keeping 

 

3 Although we attach little weight to section titles, the title of 

section 1321(c)—“Failure to establish Exchange or implement 

requirements”—reinforces this interpretation. See Gorman v. Nat’l 

Transp. Safety Bd., 558 F.3d 580, 588 n.5 (D.C. Cir. 2009) 

(recognizing that “headings ‘are of use . . . when they shed light on 

some ambiguous word or phrase’” (ellipsis in original) (quoting 

Bhd. of R.R. Trainmen v. Balt. & O. R. Co., 331 U.S. 519, 529 

(1947))).
19

with that theme, (d)(1) would simply require that an Exchange 

operate as either a governmental agency or nonprofit entity. 

But the dissent would have us construe (d)(1) differently. In 

its view, (d)(1) plays a definitional role unique among section 

1311(d)’s otherwise operational provisions, creating a legal 

fiction that any Exchange is, by definition, established by a 

state, even when, as a matter of fact, it is not. That reading, 

however, would render (d)(1) the odd man out twice over:

both within section 1311(d) and among the ACA’s other 

definitional provisions, which, unlike (d)(1), employ the 

(unmistakably definitional) formula of “The term ‘X’ means 

. . . .” See, e.g., 42 U.S.C. §§ 300gg-91, 18024; see also 26 

U.S.C. § 4980H(c). 

The dissent’s reading would also require us to overlook 

the fact that section 1311(d) would be a strange place for 

Congress to have buried such a legal fiction. Section 1311, 

after all, concerns Exchanges that are established by states in 

fact; the legal fiction the dissent urges would matter only to 

Exchanges established by the federal government. To accept 

the dissent’s construction would therefore transform (d)(1) 

into the proverbial elephant in the mousehole—the “ancillary 

provision[]” that “alter[s] the fundamental details of a 

regulatory scheme.” Whitman v. Am. Trucking Ass’ns, 531 

U.S. 457, 468 (2001). The Supreme Court has repeatedly held 

that Congress does not legislate in this manner, see id.; accord 

Gonzales v. Oregon, 546 U.S. 243, 267 (2006), and we see no 

evidence that it did so here.4Indeed, we are particularly loath 

 

4 The government makes its own elephants-in-mouseholes 

argument, asserting that the formula for calculating tax credits

(located in section 36B(b)) is an odd place to insert a condition that 

the states must establish their own Exchanges if they wish to secure 

tax credits for their citizens. The more natural location, the 
20

to accept the dissent’s construction given that there are far 

more natural locations to place this fiction, such as section 

1321 or the provision defining the term “Exchange,” 42 

U.S.C. § 300gg-91(d)(21). 

The dissent’s construction of (d)(1) also ignores the 

structural relationship between sections 1311 and 1321. Just 

as section 1311(b)(1) assumes that states will establish 

Exchanges in general, see 42 U.S.C. § 18031(b)(1), section 

 

government suggests, would have been section 36B(a), which 

authorizes the credit in the first place. See 26 U.S.C. § 36B(a). But 

even under the government’s reading of section 36B(b), the 

statutory formula houses an elephant: namely, the rule that 

subsidies are only available for plans purchased through 

Exchanges. Given that this other crucial limitation on the 

availability of subsidies is found only in section 36B’s formula, the 

government’s contention that the formula is a mere mousehole is 

unpersuasive. 

Equally unpersuasive is the dissent’s suggestion that section 

36B cannot mean what it plainly says because Congress did not use 

an “if/then” formula to signify that credits are available only on 

state-established Exchanges. The dissent cites no authority for 

requiring such magic words, and we perceive none. Section 36B(b) 

also does not employ an “if/then” construction for the requirement 

that credit-eligible coverage be purchased through an Exchange, yet 

neither the government nor dissent disputes that requirement. It is 

simply not the case that Congress expresses conditions only 

through such language. Indeed, in 26 U.S.C. § 35, which 

establishes a tax credit to offset the cost of health insurance for 

certain workers displaced by foreign competition, Congress made 

the availability of the credit turn, in part, on state cooperation 

without employing “if/then” language, simply through its definition 

of the phrase “eligible coverage month.” See 26 U.S.C. 

§ 35(e)(2)(A).
21

1311(d) assumes that states will carry out the specific 

requirements Exchanges must meet. But if those assumptions

prove wrong, section 1321 assigns the federal government 

responsibility both to establish the Exchange and to ensure

that it satisfies the particulars of section 1311(d). See id.

§ 18041(c) (directing the Secretary to “establish and operate 

such Exchange” and to “take such actions as are necessary to 

implement such other requirements” pertaining to 

Exchanges). In other words, section 1321 creates a limited 

scheme of substitution: the requirements assigned to states by 

1311(d) are transferred to the federal government if a state 

fails to establish an Exchange. The specific requirement that 

(d)(1) assumes each state will fulfill is to establish an 

Exchange in the form of “a governmental agency or nonprofit 

entity.” So if a state elects not to participate in the creation of 

an Exchange, section 1321 directs the federal government that 

it must create “a governmental agency or nonprofit entity” to 

serve as the Exchange. Crucially, this construction does not 

entail ignoring the plain meaning of “established by a State” 

in section 1311(d)(1); here, section 1321 tells us to substitute 

the federal government for the state under a certain scenario. 

But there is nothing comparable with respect to section 36B: 

no analogue to section 1321 says that section 36B should be 

read to encompass federally-established Exchanges. 

Accordingly, we reject the dissent’s argument that, because

federal Exchanges are established under section 1311, they 

are by definition “established by a State.”

Instead, sections 1311 and 1321 lead us to interpret 

section 36B essentially as appellants do. Those provisions, to 

be sure, establish some degree of equivalence between state 

and federal Exchanges—enough, indeed, that if section 36B 

had authorized credits for insurance purchased on an 

“Exchange established under section 1311,” the IRS Rule 

would stand. But section 36B actually authorizes credits only 
22

for coverage purchased on an “Exchange established by the 

State under section 1311,” 26 U.S.C. § 36B(c)(2)(A)(i), and 

the government offers no textual basis—in sections 1311 and 

1321 or elsewhere—for concluding that a federallyestablished Exchange is, in fact or legal fiction, established by 

a state. Moreover, as we have noted, that absence is especially

glaring given that the ACA elsewhere provides that a federal 

territory that establishes an Exchange “shall be treated as a 

State,” 42 U.S.C. § 18043(a), clearly demonstrating that 

Congress knew how to deem a non-state entity to be a “State.” 

Thus, at least in light of sections 1311 and 1321, the meaning 

of section 36B appears plain: a federal Exchange is not an 

“Exchange established by the State.”

B

The government argues that we should not adopt the 

plain meaning of section 36B, however, because doing so 

would render several other provisions of the ACA absurd. Our 

obligation to avoid adopting statutory constructions with 

absurd results is well-established. See Pub. Citizen v. U.S. 

Dep’t of Justice, 491 U.S. 440, 454-55 (1989). Under this 

principle, we will not give effect to a statute’s literal meaning 

when doing so would “render[ the] statute nonsensical or 

superfluous or . . . create[] an outcome so contrary to 

perceived social values that Congress could not have intended 

it.” United States v. Cook, 594 F.3d 883, 891 (D.C. Cir. 2010)

(internal quotation marks omitted). But we do not disregard 

statutory text lightly. The Constitution assigns the legislative 

power to Congress, and Congress alone, see U.S. CONST. art. 

I, § 1, and legislating often entails compromises that courts

must respect. See Barnhart v. Sigmon Coal Co., 534 U.S. 438, 

461 (2002). See generally John F. Manning, The Absurdity 

Doctrine, 116 HARV. L. REV. 2387, 2434-2435 (2003) 

(warning that an overbroad application of the absurdity
23

doctrine “contradicts the rule-of-law objectives implicit in the 

Constitution’s strict separation of lawmaking from judging”). 

We therefore give the absurdity principle a narrow domain, 

insisting that a given construction cross a “high threshold” of 

unreasonableness before we conclude that a statute does not 

mean what it says. Cook, 594 F.3d at 891. A provision thus

“may seem odd” without being “absurd,” and in such 

instances “it is up to Congress rather than the courts to fix it,” 

even if it “may have been an unintentional drafting gap.”

Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 

565 (2005) (internal quotation marks omitted); see also Sierra 

Club v. EPA, 294 F.3d 155, 161 (D.C. Cir. 2002) (“Because 

our role is not to ‘correct’ the text so that it better serves the 

statute’s purposes, we will not ratify an interpretation that 

abrogates the enacted statutory text absent an extraordinarily 

convincing justification.” (internal quotation marks and 

citation omitted)). 

i

The government first argues that we must uphold the IRS 

Rule to avoid rendering language in 26 U.S.C. § 36B(f) 

superfluous. Titled “Reconciliation of credit and advance 

credit,” section 36B(f) requires the IRS to reduce a taxpayer’s 

end-of-year credit by the amount of any advance payments 

made by the government to the taxpayer’s insurer to offset the 

cost of monthly premiums. Id. § 36B(f)(1); see 42 U.S.C. 

§ 18082(c)(2)(A) (authorizing such advance payments). As 

relevant here, section 36B(f) also requires “each Exchange”—

i.e., both state and federal Exchanges—to report certain 

information to the government. With respect to any health 

plan it provides, an Exchange must report:

(A)The level of coverage . . . and the period such 

coverage was in effect.
24

(B) The total premium for the coverage without regard to 

the credit under this section or cost-sharing reductions 

under section 1402 of [the ACA].

(C) The aggregate amount of any advance payment of 

such credit or reductions . . . .

(D)The name, address, and [taxpayer identification 

number (TIN)] of the primary insured and the name 

and TIN of each other individual obtaining coverage 

under the policy.

(E) Any information provided to the Exchange, including 

any change of circumstances, necessary to determine 

eligibility for, and the amount of, such credit.

(F) Information necessary to determine whether a 

taxpayer has received excess advance payments.

26 U.S.C. § 36B(f)(3). The government contends that these 

reporting requirements assume that credits are available on 

federal Exchanges, and it argues that the requirements would 

be superfluous, even nonsensical, as applied to federal 

Exchanges if we were to reject that assumption. 

Not so. Even if credits are unavailable on federal 

Exchanges, reporting by those Exchanges still serves the 

purpose of enforcing the individual mandate—a point the 

IRS, in fact, acknowledged in promulgating a recent 

regulation, 26 C.F.R. § 1.6055-1(d)(1). That regulation 

exempts insurers from 26 U.S.C. § 6055, which otherwise 

would require that, for each policy they issue, insurers report

to the IRS such information as “the name, address, and TIN of 

the primary insured,” the dates of coverage, and the “amount 

(if any) or any advance payment . . . or of any premium tax 

credit under section 36B with respect to such coverage.” 26 

U.S.C. § 6055(b)(1)(B). The IRS justified the exemption for 

insurers on the ground that “Exchanges must report on this 

coverage under section 36B(f)(3).” Information Reporting of 
25

Minimum Essential Coverage, 79 Fed. Reg. 13,220, 13,221 

(Mar. 10, 2014); see 26 C.F.R. § 1.6055-1(d)(1).5The 

government’s claim that section 36B(f)(3)’s reporting 

requirement serves no purpose other than reconciling credits 

is therefore simply not true.6

Furthermore, holding that credits are unavailable on 

federal Exchanges would not convert the specific reporting 

requirements concerning credits into an “‘empty gesture.’” 

Gov’t Br. 28 (quoting Fund for Animals, Inc. v. Kempthorne, 

472 F.3d 872, 878 (D.C. Cir. 2006)). Those requirements 

would still allow the reconciling of credits on state 

Exchanges; as applied to federal Exchanges, they would 

simply be over-inclusive. Over-inclusiveness, however, 

remains a problem even if we were to agree that section 36B 

allows credits on federal Exchanges. Section 36B(f)(3), after 

all, mandates reporting “with respect to any health plan 

provided through the Exchange,” 26 U.S.C. § 36B(f)(3)

(emphasis added), even though only plans purchased by 

taxpayers with incomes between 100 and 400 percent of the 

federal poverty line may be subsidized, see id. § 36B(a), 

 

5 Appellants also suggest that the information collected from 

federal Exchanges could be useful for the “Study on Affordable 

Coverage” mandated by the ACA in that same section. See ACA 

§ 1401(c), 124 Stat. at 220.

6 The dissent takes a slightly different tack, emphasizing that 

the “principal purpose” of the reporting requirement is to reconcile 

advance and end-of-year payments. Dissenting Op. at 22. We agree 

but fail to see how this helps the government. Reporting by stateestablished Exchanges still would serve this purpose, while 

reporting by federally-established Exchanges would serve the 

secondary purpose implicitly recognized by 26 C.F.R. § 1.6055-

1(d)(1).
26

(c)(1)(A). A weakness common to both views of the 

availability of credits hardly serves as a basis for choosing 

between them. 

ii

The government next points to the supposedly absurd 

consequences appellants’ interpretation of section 36B would 

have for section 1312 of the ACA, which defines the rights of 

“qualified individuals.” See 42 U.S.C. § 18032. The term 

“‘qualified individual’ means, with respect to an Exchange, an 

individual who— (i) is seeking to enroll in a qualified health 

plan in the individual market offered through the Exchange; 

and (ii) resides in the State that established the Exchange.” Id.

§ 18032(f)(1)(A). If this provision is given its plain meaning, 

then the 36 states with federal Exchanges (that, obviously, the 

states did not establish) have no qualified individuals. That 

outcome is absurd, the government argues, because in its view 

section 1312 restricts access to Exchanges to qualified 

individuals alone. See 45 C.F.R. § 155.20. The absence of 

qualified individuals would mean that federal Exchanges have 

no customers and therefore no purpose. The government 

urges us to avoid this outcome by construing section 1321 to 

authorize the federal government to establish Exchanges “on 

behalf of” states that decline to do so. Gov’t Br. 21 (internal 

quotation marks omitted).

The government, however, tilts at windmills. It assumes 

that when section 1312(a) states that “[a] qualified individual 

may enroll in any qualified health plan available to such 

individual and for which such individual is eligible,” 42 

U.S.C. § 18032(a)(1), it means that only a qualified individual 

may enroll in such a plan. The obvious flaw in this 

interpretation is that the word “only” does not appear in the 

provision. We have repeatedly emphasized that it is “not our 
27

role” to “engage in a statutory rewrite” by “insert[ing] the 

word ‘only’ here and there.” Adirondack Med. Ctr. v. 

Sebelius, 740 F.3d 692, 699-700 (D.C. Cir. 2014); see Lamie 

v. U.S. Tr., 540 U.S. 526, 538 (2004) (rejecting an 

interpretation that “would have [the Court] read an absent 

word into the statute” because such an interpretation “would 

result ‘not [in] a construction of [the] statute, but, in effect, an 

enlargement of it by the court’” (second and third alterations 

in original) (quoting Iselin v. United States, 270 U.S. 245, 251 

(1926))); Pub. Citizen, 533 F.3d at 817 (“Congress knows 

well how to say that disclosures may be made only under 

specified provisions or circumstances, but it did not do so 

here.” (footnote omitted)). Section 1312(a)’s actual language 

simply establishes the right of a qualified individual to enroll 

in any qualified health plan, at any level of coverage.7 On this 

reading, giving the phrase “established by the State” its plain 

meaning creates no difficulty, let alone absurdity. Federal 

Exchanges might not have qualified individuals, but they 

would still have customers—namely, individuals who are not 

“qualified individuals.”8

 

7 Under the ACA, qualified health plans may offer four 

different levels of coverage: bronze, silver, gold, and platinum. The 

level of coverage reflects the percentage of the insured’s medical 

costs that the plan’s benefits are designed to cover. See 42 U.S.C. 

§ 18022(d)(1). Lower levels of coverage have higher deductibles 

and thus higher out-of-pocket costs and, as a general matter, lower 

premiums. See id.; see also id. § 18032(a)(2) (providing that 

qualified employers may “select[] any level of coverage under 

section 18022(d) . . . to be made available to employees through an 

Exchange”).

8 The government warns that interpreting section 1312(a) as a 

non-discrimination provision would allow undocumented aliens to 

shop on Exchanges. Gov’t Br. at 31. But section 1312 specifically 
28

Several other provisions in section 1312 imply that not 

only “qualified individuals” may participate in an Exchange. 

Take, for example, the provision concerning incarcerated 

convicts. Section 1312(f)(1)(B) states that “[a]n individual 

shall not be treated as a qualified individual if, at the time of 

enrollment, the individual is incarcerated, other than 

incarceration pending the disposition of charges.” 42 U.S.C.

§ 18032(f)(1)(B) (emphasis added). By implying that an 

incarcerated convict may enroll in coverage through an 

Exchange despite not being a “qualified individual,” this 

provision suggests that participation in an Exchange does not 

depend on “qualified individual” status. That proposition 

gains further strength from section 1312(d)(3), which states, 

first, that “[n]othing in this title shall be construed to restrict 

the choice of a qualified individual to enroll or not to enroll in 

a qualified health plan or to participate in an Exchange,” 42 

U.S.C. § 18032(d)(3)(A), and, second, that “[n]othing in this 

title shall be construed to compel an individual to enroll in a 

qualified health plan or to participate in an Exchange,” id.

§ 18032(d)(3)(B). The second provision, which speaks of 

“individual[s]” generally, would be wholly unnecessary if 

only “qualified individuals” were eligible to participate in the 

Exchanges.9

 

addresses that concern, providing that aliens not “lawfully present 

in the United States . . . may not be covered under a qualified health 

plan in the individual market that is offered through an Exchange.” 

42 U.S.C. § 18032(f)(3). 

9 We note that section 1312’s heading, “Consumer Choice,” 

and subsection 1312(a)’s heading, “Choice,” also suggest that the 

purpose of section 1312(a) is primarily to protect choice among 

levels of coverage, not restrict access to Exchanges.
29

iii

The government also claims that a plain meaning reading 

of section 36B would have peculiar effects under 42 U.S.C. 

§ 1396a(gg)(1). That provision states that, as a condition of 

receiving Medicaid funds, a State may not tighten its 

Medicaid eligibility standards for adults until “the date on 

which the Secretary determines that an Exchange established 

by the State under [section 1311] is fully operational.” 42 

U.S.C. § 1396a(gg)(1). If a federally-established Exchange is 

not one “established by the State,” the government argues, 

states with federal Exchanges “would never be relieved of 

th[is] . . . requirement,” transforming an “interim measure” 

into a “perpetual obligation.” Gov’t Br. at 33. But appellants 

propose a logical explanation for why the ACA might 

establish this rule: to preserve Medicaid benefits for the 

impoverished residents of states where, as a result of having 

federally-established Exchanges, subsidies are unavailable. 

Cf. Pub. Citizen, 533 F.3d at 817 (adopting a reasonable 

explanation of a provision’s purpose despite not being able to 

“know for certain what purpose Congress had in mind”). In 

this light, the results produced by giving section 36B its plain 

meaning seem sensible, not absurd.10

 

10 In a footnote, the government identifies another set of 

provisions that supposedly embodies the assumption that federal 

Exchanges are Exchanges “established by the State”: 42 U.S.C. 

§ 1397ee(d)(3)(B)-(C). Those provisions instruct states to enroll 

children in coverage “offered through an Exchange established by 

the State under section [1311]” in the event of a funding shortfall in 

a state’s Children’s Health Insurance Program. See id.

§ 1397ee(d)(3)(B). Although we recognize the oddity of requiring 

some states and not others to take this step, we do not see how it 

makes the statute nonsensical or otherwise meets the high threshold 
30

iv

The government urges us, in effect, to strike from section 

36B the phrase “established by the State,” on the ground that 

giving force to its plain meaning renders other provisions of 

the Act absurd. But we find that the government has failed to 

make the extraordinary showing required for such judicial 

rewriting of an act of Congress. Nothing about the imperative 

to read section 36B in harmony with the rest of the ACA

requires interpreting “established by the State” to mean 

anything other than what it plainly says.

C

This conclusion places us at a fork in our precedent. One 

line of cases instructs us to cease our inquiry and give effect 

to the statute’s unambiguous language. See Coal. for 

Responsible Regulation, Inc. v. EPA, 684 F.3d 102, 137 (D.C. 

Cir. 2012) (per curiam) (noting, in the Chevron context, that 

“‘[w]hen the words of a statute are unambiguous . . . judicial 

inquiry is complete’” (ellipsis in original) (quoting Conn. 

Nat’l Bank v. Germain, 503 U.S. 249, 254 (1992)), aff’d in 

relevant part sub nom. Util. Air Regulatory Grp. v. EPA

(UARG), 134 S. Ct. 2427, 2448 (2014); accord Dep’t of 

Housing & Urban Dev. v. Rucker, 535 U.S. 125, 132-33 

(2002); Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 

(1999) (“As in any case of statutory construction, our analysis 

 

of absurdity. The statute remains workable, and nothing suggests 

that in states with federal Exchanges, the federal government could 

not step in and perform the same service for uninsured children.

The government’s bare citation to the provisions thus hardly 

demonstrates absurdity. 
31

begins with the language of the statute. And where the 

statutory language provides a clear answer, it ends there as 

well.” (emphasis added) (internal quotation marks and citation 

omitted)); see also Am. Fed’n of Gov’t Emps. v. Shinseki, 709 

F.3d 29, 33 (D.C. Cir. 2013). Another tells us to wade into the

legislative history in the hope of glimpsing “new light on 

congressional intent.” Sierra Club v. EPA, 551 F.3d 1019, 

1027 (D.C. Cir. 2008). But, though we recognize that our 

decision about which path to travel implicates substantial 

theoretical questions of statutory interpretation, its practical 

consequences are less momentous here because both paths 

lead to the same destination. Therefore, assuming arguendo

that it is proper to consult legislative history when the 

statutory text is clear, we consider what light the ACA’s 

history offers.

We begin by clarifying the role the ACA’s legislative 

history might play in our analysis. Legislative history is a 

means to an end, to be consulted for evidence of 

congressional intent. See, e.g., Sierra Club, 551 F.3d at 1027.

But legislative history is not the sole, or even the primary, 

source of such evidence. Rather, “[t]he most reliable guide to 

congressional intent is the legislation the Congress enacted.” 

Sierra Club, 294 F.3d at 161; see also Cal. Indep. Sys. 

Operator Corp. v. FERC, 372 F.3d 395, 400 (D.C. Cir. 2004) 

(“[W]e assume ‘that the legislative purpose is expressed by 

the ordinary meaning of the words used.’” (quoting Sec. 

Indus. Ass’n v. Bd. of Governors of Fed. Reserve Sys., 468 

U.S. 137, 149 (1984))); Engine Mfrs. Ass’n, 88 F.3d at 1088 

(noting that the “most traditional tool” for “determin[ing] 

Congressional intent” is “to read the text”). Where used, 

legislative history plays a distinctly secondary role. Its 

purpose is not to confirm already clear text; clear text speaks 

for itself and requires no “amen” in the historical record. See, 

e.g., Harrison v. PPG Indus., Inc., 446 U.S. 578, 592 (1980) 
32

(“[I]t would be a strange canon of statutory construction that 

would require Congress to state in committee reports or 

elsewhere in its deliberations that which is obvious on the 

face of a statute.”). Instead, only when “apparently plain 

language compels an ‘odd result’” might we look to 

legislative history to ensure that the “‘literal application of a 

statute will [not] produce a result demonstrably at odds with 

the intentions of its drafters.’” Engine Mfrs. Ass’n, 88 F.3d at 

1088 (quoting Public Citizen, 491 U.S. at 454, and United 

States v. Ron Pair Enters., Inc., 489 U.S. 235, 242 (1989)). 

Thus, accepting for the sake of argument the government’s 

contention that the results of appellants’ construction of 

section 36B are odd, our inquiry into the ACA’s legislative 

history is quite narrow. In the face of the statute’s plain 

meaning—a federal Exchange is not an “Exchange 

established by the State”—we ask only whether the legislative 

history provides evidence that this literal meaning is 

“demonstrably at odds with the intentions” of the ACA’s 

drafters. Unless evidence in the legislative record establishes 

that it is, we must hew to the statute’s plain meaning, even if 

it compels an odd result. See id. (“[T]here must be evidence 

that Congress meant something other than what it literally 

said before a court can depart from plain meaning.”); accord 

Garcia v. United States, 469 U.S. 70, 75 (1984) (noting that 

“only the most extraordinary showing of contrary intentions 

. . . would justify a limitation on the ‘plain meaning’ of the 

statutory language”); Bldg. & Constr. Trades Dep’t, AFL-CIO 

v. U.S. Dep’t of Labor Wage Appeals Bd., 932 F.2d 985, 990 

(D.C. Cir. 1991).

Here, the scant legislative history sheds little light on the 

precise question of the availability of subsidies on federal 

Exchanges. The government points, for example, to a 

Congressional Budget Office report from November 2009, 

before the ACA’s adoption, that calculated the cost of 
33

subsidies based on the assumption that they would be 

available in all states. But that assumption is as consistent 

with an expectation that all states would cooperate (i.e., 

establish their own Exchanges) as with an understanding that 

subsidies would be available on federal Exchanges as well. 

Cf. Robert Pear, U.S. Officials Brace for Huge Task of 

Operating Health Exchanges, N.Y. TIMES, at A17 (Aug. 5, 

2012) (“When Congress passed legislation to expand 

coverage two years ago, Mr. Obama and lawmakers assumed 

that every state would set up its own exchange . . . .”). Equally 

unilluminating are floor statements by Senate sponsors of the 

ACA touting the availability and benefits of premium tax 

credits in general, but not addressing the precise issue of 

whether they would be available on federal Exchanges. 

The government and its amici are thus left to urge the 

court to infer meaning from silence, arguing that “during the 

debates over the ACA, no one suggested, let alone explicitly 

stated, that a State’s citizens would lose access to the tax 

credits if the State failed to establish its own Exchange.” Br. 

of Amici Members of Congress and State Legislatures 8. The 

historical record, however, belies this claim. The Senate 

Committee on Health, Education, Labor, and Pensions 

(HELP) proposed a bill that specifically contemplated 

penalizing states that refused to participate in establishing

“American Health Benefit Gateways,” the equivalent of 

Exchanges, by denying credits to such states’ residents for 

four years. See Affordable Health Choices Act, S. 1679, 111th 

Cong. § 3104(a), (d)(2) (2009). This is not to say that section 

36B necessarily incorporated this thinking; we agree that 

inferences from unenacted legislation are too uncertain to be a 

helpful guide to the intent behind a specific provision. See 

Village of Barrington v. Surface Transp. Bd., 636 F.3d 650, 

666 (D.C. Cir. 2011). But the HELP Committee’s bill 

certainly demonstrates that members of Congress at least 
34

considered the notion of using subsidies as an incentive to 

gain states’ cooperation. 

In any case, even if the historical record were silent, that 

silence is unhelpful to the government. For the court to depart 

from the ACA’s plain meaning, which favors appellants,

“there must be evidence that Congress meant something other 

than what it literally said,” from which the court can conclude 

that applying the statute literally would be “‘demonstrably at 

odds with the intentions of [the ACA’s] drafters.’” Engine 

Mfrs. Ass’n, 88 F.3d at 1088 (quoting Ron Pair Enters., 489 

U.S. at 242) (emphases added). As Chief Justice Marshall 

wrote, “it is incumbent on those who oppose” a statute’s plain 

meaning “to shew an intent varying from that which the 

words import.” United States v. Fisher, 6 U.S. (2 Cranch) 

358, 386 (1805). Nothing the government or its amici cite 

demonstrates what that precise intent was. And “[i]n the 

absence of such evidence, the court cannot ignore the text by 

assuming that if the statute seems odd to us, i.e., the statute is 

not as we would have predicted beforehand that Congress 

would write it, it could be the product only of oversight, 

imprecision, or drafting error.” Engine Mfrs. Ass’n, 88 F.3d at 

1088-89; see also id. at 1091 (“With such a meager record of 

what happened in conference, the court is unable to 

reconstruct the legislative compromises that were made. Even 

if the final product might strike us as unexpected . . . the court 

could not make the leap from such an impression to the 

certainty that such a result was unintentional.”).

The government, together with the dissent, also leans

heavily on a more abstract form of legislative history—

Congress’s broad purpose in passing the ACA—urging the 

court to view section 36B through the lens of the ACA’s 

economic theory and ultimate aims. They emphasize that to 

achieve the goals of “near universal coverage” and 
35

“lower[ing] health insurance premiums,” 42 U.S.C. 

§ 18091(2)(D), (F), the ACA relies on three interrelated 

policies: insurance market reforms prohibiting insurers from 

denying coverage or charging higher premiums based on an 

individual’s health status, see, e.g., id. § 300gg (community 

rating requirement); id. § 300gg-1 (guaranteed issue 

requirement); the individual mandate, see 26 U.S.C. § 5000A; 

and subsidies to individuals purchasing insurance in the 

individual market, see id. § 36B. These policies, the 

government and dissent explain, are like the legs of a threelegged stool; remove any one, and the ACA will collapse. The 

insurance market reforms are necessary to expand the 

availability of insurance. The individual mandate is necessary 

to avoid the adverse selection that would result if people 

could exploit the insurance market reforms to wait to 

purchase insurance until they were sick. And subsidies are 

necessary both to make the mandated insurance affordable 

and, in so doing, to expand the reach of the individual 

mandate by reducing the cost of insurance below the 

threshold—eight percent of household income—at which 

taxpayers are exempt from the mandate’s penalty. See 26 

U.S.C. § 5000A(e)(1)(A)-(B). Given this structure, the 

government and dissent argue that it is “inconceivable” to 

think Congress would have risked the ACA’s stability by 

making subsidies conditional on states establishing 

Exchanges.11 Dissenting Op. at 2.

 

11 Appellants do not challenge the government’s account of the 

economic theory behind the ACA, but they contend that the theory 

must be understood through the lens of political reality. In their 

telling, section 36B is the product of legislative compromise to 

secure the support of Nebraska Senator Ben Nelson, the crucial 

sixtieth vote needed to avoid a filibuster. Nelson opposed House 

plans for a national, federally-run exchange, fearing that it would 
36

 

set the United States down a path to a single-payer system. See 

Carrie Budoff Brown, Nelson: National Exchange a Dealbreaker, 

POLITICO (Jan. 25, 2010), http://www.politico.com/livepulse/0110/

Nelson_National_exchange_a_dealbreaker.html. To gain Nelson’s 

support, proponents of the ACA scrapped the national exchange in 

favor of establishing exchanges on a state-by-state basis. This 

change, in turn, required Congress to devise means of inducing 

states to take on the politically and technologically challenging task 

of establishing exchanges. Congress’s solution, appellants maintain, 

was a package of “carrots” and “sticks” for states. The carrots 

included federal grants to states for “activities (including planning 

activities) related to establishing an [Exchange].” 42 U.S.C. 

§ 18031(a)(3). The sticks included the prohibition against 

tightening Medicaid eligibility requirements imposed on states that 

do not create their own Exchanges. See id. § 1396a(gg). The most 

important incentive of all, appellants argue, was the provision at 

issue here: making premium tax credits available only for 

individual coverage purchased through state-established Exchanges. 

According to appellants, the ACA’s supporters believed no state 

would refuse so good an offer—and, appellants add, perhaps no 

state would have had the IRS not eliminated this incentive by 

proposing and promulgating the IRS Rule, making subsidies 

available regardless of which entity established an Exchange, 

before states had to elect whether to establish Exchanges. See 

Health Insurance Premium Tax Credit, 77 Fed. Reg. 30,377, 30,378 

(May 23, 2012); Health Insurance Premium Tax Credit, 76 Fed. 

Reg. 50,931, 50,934 (Aug. 17, 2011).

Like the government, however, appellants fail to marshal 

persuasive evidence (apart from the statutory text, that is) in 

support of their theory. Senator Nelson may have opposed a single, 

national exchange, but it does not necessarily follow that he 

opposed making subsidies available on federal fallback Exchanges 

in uncooperative states. Similarly, the fact that the ACA contained 

some incentives to states does not necessarily mean that section 

36B is one of them. Nor does the fact that Congress has conditioned 

federal benefits on state cooperation in other contexts shed light on 
37

Yet the supposedly unthinkable scenario the government 

and dissent describe—one in which insurers in states with 

federal Exchanges remain subject to the community rating 

and guaranteed issue requirements but lack a broad base of 

healthy customers to stabilize prices and avoid adverse 

selection—is exactly what the ACA enacts in such federal 

territories as the Northern Mariana Islands, where the Act 

imposes guaranteed issue and community rating requirements 

without an individual mandate. See 26 U.S.C. § 5000A(f)(4) 

(exempting residents of such federal territories as Puerto Rico 

and the Northern Mariana Islands from the individual 

mandate by providing that they are automatically treated as 

having “minimum essential coverage”); 42 U.S.C. § 201(f) 

(providing that the Public Health Service Act, where the 

guaranteed issue and community rating requirements appear, 

applies to residents of such territories). This combination, 

predictably, has thrown individual insurance markets in the 

territories into turmoil. See Sarah Kliff, Think Your State Has 

Obamacare Problems? They’re Nothing Compared to Guam, 

WASH. POST (Dec. 19, 2013), 

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12

/19/think-your-state-has-obamacare-problems-theyre-nothingcompared-to-guam/. But HHS has nevertheless refused to 

exempt the territories from the guaranteed issue and 

 

the precise question of whether Congress did so in section 36B. 

Thus, the most that can be said of appellants’ theory is that it is 

plausible. But we need not endorse appellants’ historical account to 

agree with their construction of section 36B. “Where the statutory 

language is clear and unambiguous, we need neither accept nor 

reject a particular ‘plausible’ explanation for why Congress would 

have written a statute [as it did].” Barnhart, 534 U.S. at 460.
38

community rating requirements, recognizing that, “[h]owever 

meritorious” the reasons for doing so might be, “HHS is not 

authorized to choose which provisions of the [ACA] might 

apply to the territories.” Letter from Gary Cohen, Director, 

Center for Consumer Information and Insurance Oversight, 

HHS, to Sixto K. Igisomar, Secretary of Commerce, 

Commonwealth of the Northern Mariana Islands (July 12, 

2013), available at http://www.doi.gov/oia/igia/upload/12-3-

HHS-CMS-CNMI-Letter-igisomar7-12-13.pdf. 

Moreover, the territories are not the only instance where 

the ACA did the unimaginable. A separate title of the ACA, 

known as the Community Living Assistance Services and 

Supports (CLASS) Act, see ACA, Pub. L. No. 111-148, 

§§ 8001-8002, 124 Stat. 119, 828-47 (2010), required the 

Secretary of HHS to establish a long-term care insurance 

program subject to guaranteed issue and community rating 

requirements but unaided by an individual mandate or 

premium subsidies, see 124 Stat. at 834. This recipe for 

adverse selection risk never materialized only because 

Congress, in response to actuarial analyses predicting that the 

CLASS Act would be fiscally unsustainable, repealed the 

provision in 2013.12 See American Taxpayer Relief Act of 

 

12 The dissent attempts to distinguish the market targeted by the 

CLASS Act from the individual insurance market by pointing out 

that the CLASS Act contains no individual mandate. In the 

dissent’s view, the omission “of a tool [Congress] knew to be 

important to preventing adverse selection merely indicates that 

Congress had a substantially higher tolerance for the risk of adverse 

selection” in peripheral markets than in the core market. Dissenting 

Op. at 19. This argument, however, assumes the very conclusion at

issue, taking for granted that the mandate in the individual market 

indeed is as broad as it must be to eliminate all adverse selection 

risk. But the plain language of section 36B suggests that it is not. If 
39

2012, Pub. L. No. 112-240, § 642, 126 Stat. 2313, 2358 

(2013); Sarah Kliff, The Fiscal Cliff Cuts $1.9 Billion from 

Obamacare. Here’s How, WASH. POST (Jan. 2, 2013), 

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01

/02/the-fiscal-cliff-cuts-1-9-billion-from-obamacare-hereshow/. 

The CLASS Act and the provisions applicable to the 

territories attest that Congress twice did exactly what the 

government and the dissent insist it never would: introduce 

significant adverse selection risk to insurance markets. This is 

not to say that as Congress did in the CLASS Act and 

territories, so too must it have done in section 36B; perhaps 

Congress was willing to tolerate risks in those corners of the 

insurance market that it never would tolerate at its core. But 

perhaps not. The point is that we don’t know, and in asking us 

to ignore the best evidence of Congress’s intent—the text of 

section 36B—in favor of assumptions about the risks that 

Congress would or would not tolerate—assumptions 

 

section 36B limits the availability of subsidies and thus curtails the 

reach of the individual mandate, this is evidence that Congress was 

tolerant of adverse selection risk in the core markets, although 

Congress might not have expected the risk to materialize. 

We recognize that, from an economic standpoint, such adverse 

selection risk bodes ill for individual insurance markets. But it 

made no more sense economically in the CLASS Act. Congress 

may simply have miscalculated the consequences of omitting a 

mandate, as its decision to repeal the CLASS Act suggests. In any 

event, whether by error or design, the CLASS Act in clear terms 

created a significant adverse selection risk, which, as Congress and 

the government recognized, could be undone only by subsequent 

legislation, not administrative fiat. Cf. UARG, 134 S. Ct. at 2445

(“An agency has no power to ‘tailor’ legislation to bureaucratic 

policy goals by rewriting unambiguous statutory terms.”).
40

doubtlessly influenced by hindsight—the government and 

dissent in effect urge us to substitute our judgment for 

Congress’s. We refuse. As the Supreme Court explained just 

this term, “an agency may not rewrite clear statutory terms to 

suit its own sense of how the statute should operate.” UARG, 

134 S. Ct. at 2446. And neither may we. “The role of th[e]

[c]ourt is to apply the statute as it is written—even if we think 

some other approach might ‘accor[d] with good policy.’” 

Burrage v. United States, 134 S. Ct. 881, 892 (2014) (quoting 

Comm’r v. Lundy, 516 U.S. 235, 252 (1996)) (third alteration 

in original); see also Lewis v. City of Chicago, 560 U.S. 205, 

217 (2010) (“[I]t is not our task to assess the consequences of 

each approach [to interpreting a statute] and adopt the one that 

produces the least mischief. Our charge is to give effect to the 

law Congress enacted.”); United States v. Locke, 471 U.S. 84, 

95 (1985) (“[T]he fact that Congress might have acted with 

greater clarity or foresight does not give courts a carte blanche 

to redraft statutes in an effort to achieve that which Congress 

is perceived to have failed to do.”).

More generally, the ACA’s ultimate aims shed little light 

on the “precise question at issue,” Chevron, 467 U.S. at 842—

namely, whether subsidies are available on federal Exchanges 

because such Exchanges are “established by the State.” As the 

Supreme Court has repeatedly warned, “it frustrates rather 

than effectuates legislative intent simplistically to assume that 

whatever furthers the statute’s primary objective must be the 

law” because “no legislation pursues its purposes at all costs.” 

Rodriguez v. United States, 480 U.S. 522, 525-26 (1987) (per 

curiam); see also Pension Benefit Guar. Corp. v. LTV Corp., 

496 U.S. 633, 646-47 (1990); MetroPCS Cal., LLC v. FCC, 

644 F.3d 410, 414 (D.C. Cir. 2011) (“‘The Act must do 

everything necessary to achieve its broad purpose’ is the 

slogan of the enthusiast, not the analytical tool of the 

arbiter.”). Thus, if legislative intent is to be our lodestar, we 
41

cannot assume, as the government does, that section 36B 

single-mindedly pursues the ACA’s lofty goals.

The fact is that the legislative record provides little 

indication one way or the other of congressional intent, but 

the statutory text does. Section 36B plainly makes subsidies 

available only on Exchanges established by states. And in the 

absence of any contrary indications, that text is conclusive 

evidence of Congress’s intent. Cf. Ethyl Corp. v. EPA, 51 

F.3d 1053, 1063 (D.C. Cir. 1995) (“At best, the legislative 

history is cryptic, and this surely is not enough to overcome 

the plain meaning of the statute.”). To hold otherwise would 

be to say that enacted legislation, on its own, does not 

command our respect—an utterly untenable proposition. 

Accordingly, applying the statute’s plain meaning, we find 

that section 36B unambiguously forecloses the interpretation 

embodied in the IRS Rule and instead limits the availability of 

premium tax credits to state-established Exchanges.

IV

We reach this conclusion, frankly, with reluctance. At 

least until states that wish to can set up Exchanges, our ruling 

will likely have significant consequences both for the millions 

of individuals receiving tax credits through federal Exchanges 

and for health insurance markets more broadly. But, high as 

those stakes are, the principle of legislative supremacy that 

guides us is higher still. Within constitutional limits, Congress 

is supreme in matters of policy, and the consequence of that 

supremacy is that our duty when interpreting a statute is to 

ascertain the meaning of the words of the statute duly enacted 

through the formal legislative process. This limited role 

serves democratic interests by ensuring that policy is made by 

elected, politically accountable representatives, not by 

appointed, life-tenured judges. 
42

Thus, although our decision has major consequences, our 

role is quite limited: deciding whether the IRS Rule is a 

permissible reading of the ACA. Having concluded it is not, 

we reverse the district court and remand with instructions to

grant summary judgment to appellants and vacate the IRS 

Rule. 
RANDOLPH, Senior Circuit Judge, concurring: A Supreme

Court tax decision, and a tax decision of this court, flatly reject

the position the government takes in this case. 

As Judge Griffith’s majority opinion—which I fully

join—demonstrates, an Exchange established by the federal

government cannot possibly be “an Exchange established by the

State.” To hold otherwise would be to engage in distortion, not

interpretation. Only further legislation could accomplish the

expansion the government seeks.

In the meantime, Justice Brandeis’ opinion for the Supreme

Court in Iselin v. United States is controlling: “What the

government asks is not a construction of a statute, but, in effect,

an enlargement of it by the court, so that what was omitted,

presumably by inadvertence, may be included within its scope. 

To supply omissions transcends the judicial function.” 270 U.S.

245, 251 (1926). We held the same in National Railroad

Passenger Corp. v. United States, 431 F.3d 374, 378 (D.C. Cir.

2005), citing not only Iselin but also Lamie v. United States

Trustee, 540 U.S. 526, 538 (2004), which reaffirmed Iselin’s

“longstanding” interpretative principle.
EDWARDS, Senior Circuit Judge, dissenting: This case is 

about Appellants’ not-so-veiled attempt to gut the Patient 

Protection and Affordable Care Act (“ACA”). The ACA 

requires every State to establish a health insurance 

“Exchange,” which “shall be a governmental agency or 

nonprofit entity that is established by a State.” 42 U.S.C. 

§ 18031(b)(1), (d)(1). The Department of Health and Human 

Services (“HHS”) is required to establish “such Exchange” 

when the State elects not to create one. Id. § 18041(c)(1). 

Taxpayers who purchase insurance from an Exchange and 

whose income is between 100% and 400% of the poverty line 

are eligible for premium subsidies. 26 U.S.C. § 36B(a),

(c)(1)(A). Appellants challenge regulations issued by the 

Internal Revenue Service (“IRS”) and HHS making these 

subsidies available in all States, including States in which 

HHS has established an Exchange on behalf of the State. In 

support of their challenge, Appellants rely on a specious 

argument that there is no “Exchange established by the State” 

in States with HHS-created Exchanges and, therefore, that 

taxpayers who purchase insurance in these States cannot 

receive subsidies. 

As explained below, there are three critical components to 

the ACA: nondiscrimination requirements applying to

insurers; the “individual mandate” requiring individuals who 

are not covered by an employer to purchase minimum 

insurance coverage or to pay a tax penalty; and premium 

subsidies which ensure that the individual mandate will have a 

broad enough sweep to attract enough healthy individuals into 

the individual insurance markets to create stability. These 

components work in tandem. At the time of the ACA’s 

enactment, it was well understood that without the subsidies, 

the individual mandate was not viable as a mechanism for 

creating a stable insurance market.

Appellants’ proffered construction of the statute would 

permit States to exempt many people from the individual 
2

mandate and thereby thwart a central element of the ACA. As 

Appellants’ amici candidly acknowledge, if subsidies are 

unavailable to taxpayers in States with HHS-created

Exchanges, “the structure of the ACA will crumble.” Scott 

Pruitt, ObamaCare’s Next Legal Challenge, WALL ST. J., 

Dec. 1, 2013. It is inconceivable that Congress intended to 

give States the power to cause the ACA to “crumble.” 

Appellants contend that the phrase “Exchange established 

by the State” in § 36B unambiguously bars subsidies to 

individuals who purchase insurance in States in which HHS 

created the Exchange on the State’s behalf. This argument 

fails because “the words of a statute must be read in their 

context and with a view to their place in the overall statutory 

scheme.” Nat’l Ass’n of Home Builders v. Defenders of 

Wildlife, 551 U.S. 644, 666 (2007) (internal quotation marks 

omitted). When the language of § 36B is viewed in context –

i.e., in conjunction with other provisions of the ACA – it is 

quite clear that the statute does not reveal the plain meaning

that Appellants would like to find.

Because IRS and HHS have been delegated authority to 

jointly administer the ACA, this case is governed by the 

familiar framework of Chevron U.S.A. Inc. v. Natural 

Resources Defense Council, Inc., 467 U.S. 837 (1984). Under 

Chevron, if “the statute is silent or ambiguous with respect to 

the specific issue,” we defer to the agency’s construction of 

the statute, so long as it is “permissible.” Id. at 843. The 

Government’s permissible interpretation of the statute easily 

survives review under Chevron. The Act contemplates that an 

Exchange created by the federal government on a State’s 

behalf will have equivalent legal standing with State-created 

Exchanges. 42 U.S.C. § 18041. And the ACA would be selfdefeating if taxpayers who purchase insurance from an HHScreated Exchange are deemed ineligible to receive subsidies. 
3

Appellants’ argument cannot be squared with the clear 

legislative scheme established by the statute as a whole.

Apparently recognizing the weakness of a claim that rests 

solely on § 36B, divorced from the rest of the ACA, 

Appellants attempt to fortify their position with the 

extraordinary argument that Congress tied the availability of 

subsidies to the existence of State-established Exchanges to 

encourage States to establish their own Exchanges. This claim 

is nonsense, made up out of whole cloth. 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. 

The majority opinion ignores the obvious ambiguity in the 

statute and claims to rest on plain meaning where there is none 

to be found. In so doing, the majority misapplies the 

applicable standard of review, refuses to give deference to the 

IRS’s and HHS’s permissible constructions of the ACA, and 

issues a judgment that portends disastrous consequences. I 

therefore dissent.

I. STANDARD OF REVIEW

The first question a reviewing court must ask in a case of 

this sort is whether the disputed provisions of the statute are 

clear beyond dispute. “If a court, employing traditional tools 

of statutory construction, ascertains that Congress had an 

intention on the precise question at issue, that intention is the 

law and must be given effect.” Chevron, 467 U.S. at 843 n.9. 

In determining whether a statutory provision is ambiguous,
4

however, a court must evaluate it within the context of the 

statute as a whole:

[A] reviewing court should not confine itself to 

examining a particular statutory provision in isolation. 

Rather, the meaning – or ambiguity – of certain words or 

phrases may only become evident when placed in context. 

. . . It is a fundamental canon of statutory construction 

that the words of a statute must be read in their context 

and with a view to their place in the overall statutory 

scheme.

Nat’l Ass’n of Home Builders, 551 U.S. at 666 (citations, 

alteration, and internal quotation marks omitted); see also

FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 

132-33 (2000); Davis v. Mich. Dep’t of Treasury, 489 U.S. 

803, 809 (1989).

In other words, “[t]he plainness or ambiguity of statutory 

language is determined by reference to the language itself, the 

specific context in which that language is used, and the 

broader context of the statute as a whole.” Robinson v. Shell 

Oil Co., 519 U.S. 337, 341 (1997). The Supreme Court just 

recently reiterated this principle, making it clear that even 

when a statute is not “a chef d’oeuvre of legislative 

draftsmanship” – as the ACA is not – courts must bear “in 

mind the fundamental canon of statutory construction that the 

words of a statute must be read in their context and with a 

view to their place in the overall statutory scheme.” Util. Air 

Regulatory Grp. v. EPA, No. 12-1146, 2014 WL 2807314, at 

*9 (June 23, 2014) (internal quotation marks omitted).

When a “court determines Congress has not directly 

addressed the precise question at issue, the court does not 

simply impose its own construction on the statute.” Chevron, 
5

467 U.S. at 843. Rather, “the question for the court is whether 

the agency’s answer is based on a permissible construction of 

the statute,” id., that is, whether the agency’s interpretation is 

“manifestly contrary to the statute,” id. at 844. See, e.g., Mayo 

Found. for Med. Educ. & Research v. United States, 131 S. Ct. 

704, 711 (2011) (deferring to the agency’s interpretation 

because the statute did not speak with “the precision 

necessary” to definitively answer the question, and the 

agency’s interpretation was not “manifestly contrary to the 

statute”).

Appellants argue that Chevron deference is unwarranted 

because some of the provisions at issue “are codified in a 

chapter of Title 42 . . . the domain of HHS, not the IRS,” and 

the “IRS has no power to enforce or administer those 

provisions.” Br. for Appellants at 46. Appellants’ position is 

mistaken. Chevron applies because IRS and HHS are tasked 

with administering the provisions of the ACA in coordination. 

See 42 U.S.C. § 18082(a); Nat’l Ass’n of Home Builders, 551 

U.S. at 665 (applying Chevron deference to a regulation 

promulgated by the National Marine Fisheries Service and the 

Fish and Wildlife Service “acting jointly”). Here, there is no 

issue of one agency interpreting the statute in a way that 

conflicts with the other agency’s interpretation. The IRS’s rule 

defines “Exchange” by reference to the HHS’s definition, 

which provides that subsidies are available to low-income 

taxpayers purchasing insurance on an Exchange “regardless of 

whether the Exchange is established and operated by a State 

. . . or by HHS.” 45 C.F.R. § 155.20; 26 C.F.R. § 1.36B-1(k).

Appellants also argue that Chevron deference is precluded 

by the canon that “tax credits ‘must be expressed in clear and 

unambiguous terms.’” Br. for Appellants at 51 (quoting Yazoo 

& Miss. Valley R.R. Co. v. Thomas, 132 U.S. 174, 183 (1889)). 

Again, Appellants’ position is mistaken. The Supreme Court 
6

has made clear that “[t]he principles underlying [the] decision 

in Chevron apply with full force in the tax context.” Mayo 

Found., 131 S. Ct. at 713.

Chevron plainly applies to this case. And this court is 

obliged to defer to the IRS’s and HHS’s “permissible” 

interpretations of the ACA. Chevron, 467 U.S. at 843. 

II. ANALYSIS

Appellants’ argument focuses almost entirely on 26 

U.S.C. § 36B, considered in isolation from the other 

provisions of the ACA. Repeating the phrase “Exchange 

established by the State” as a mantra throughout their brief, 

Appellants contend that this language unambiguously 

indicates that § 36B(b) conditions refundable tax credits on a 

State – and not HHS – establishing an Exchange.

Appellants’ argument unravels, however, when the phrase 

“established by the State” is subject to close scrutiny in view

of the surrounding provisions in the ACA. See Brown & 

Williamson, 529 U.S. at 132 (“The . . . ambiguity . . . of certain 

. . . phrases may only become evident when placed in 

context.”). In particular, § 36B has no plain meaning when 

read in conjunction with § 18031(d)(1) and § 18041(c). And, 

more fundamentally, the purported plain meaning of § 36B(b)

would subvert the careful policy scheme crafted by Congress, 

which understood when it enacted the ACA that subsidies 

were critically necessary to ensure that the goals of the ACA 

could be achieved. Simply put, § 36B(b) interpreted as 

Appellants urge would function as a poison pill to the 

insurance markets in the States that did not elect to create their 

own Exchanges. This surely is not what Congress intended. 
7

Perhaps because they appreciate that no legitimate method 

of statutory interpretation ascribes to Congress the aim of 

tearing down the very thing it attempted to construct,

Appellants in this litigation have invented a narrative to 

explain why Congress would want health insurance markets to 

fail in States that did not elect to create their own Exchanges.

Congress, they assert, made the subsidies conditional in order 

to incentivize the States to create their own exchanges. This 

argument is disingenuous, and it is wrong. Not only is there no 

evidence that anyone in Congress thought § 36B operated as a 

condition, there is also no evidence that any State thought of it 

as such. And no wonder: The statutory provision presumes the 

existence of subsidies and was drafted to establish a formula

for the payment of tax credits, not to impose a significant and 

substantial condition on the States.

It makes little sense to think that Congress would have 

imposed so substantial a condition in such an oblique and 

circuitous manner. See Whitman v. Am. Trucking Ass’ns, 531 

U.S. 457, 468 (2001) (“Congress . . . does not alter the 

fundamental details of a regulatory scheme in vague 

terms . . . .”). The simple truth is that Appellants’ incentive 

story is a fiction, a post hoc narrative concocted to provide a 

colorable explanation for the otherwise risible notion that 

Congress would have wanted insurance markets to collapse in 

States that elected not to create their own Exchanges.

In the end, the question for this court is whether § 36B 

unambiguously operates as a condition limiting the tax 

subsidies that Congress understood were a necessary part of a 

functioning insurance market to only those States that created 

their own exchange. The phrase “Exchange established by the 

State,” standing alone, suggests the affirmative. But there is 

powerful evidence to the contrary – both in § 36B and the 
8

provisions it references, and in the Act as a whole – that shows 

Appellants’ argument to be fatally flawed.

It is not the prerogative of this court to interpret the 

ambiguities uncovered in the ACA. Congress has delegated 

this authority to the IRS and HHS. And the interpretation 

given by these agencies is not only permissible but also the 

better construction of the statute because § 36B is not clearly 

drafted as a condition, because the Act empowers HHS to 

establish exchanges on behalf of the States, because parallel 

provisions indicate that Congress thought that federal 

subsidies would be provided on HHS-created exchanges, and, 

most importantly, because Congress established a careful 

legislative scheme by which individual subsidies were 

essential to the basic viability of individual insurance markets.

A. Appellants’ “Plain Meaning” Argument Viewed in 

Context

In arguing that the ACA clearly and unambiguously bars 

subsidies to individuals who purchase insurance in States in 

which HHS created the Exchange on the State’s behalf,

Appellants rest on a narrow, out-of-context interpretation of 

§ 36B(b) and § 36B(c)(2)(A)(i). Br. for Appellants at 16.

Appellants argue that because there is no “Exchange 

established by the State” in States with HHS-created 

Exchanges, taxpayers who purchase insurance in these States 

cannot receive subsidies. This plain meaning argument, which 

views § 36B in isolation, is simplistic and wrong. 

We cannot read § 36B in isolation; we must also consider 

the specific context of the provision and the “broader context 

of the statute as a whole.” Robinson, 519 U.S. at 341. And 

viewing the matter through this wider lens, as we must, the 

provision which initially might appear plain is far from 
9

unambiguous. To begin with, as the Government points out, 

§ 36B refers to premiums for health plans enrolled in through 

“an Exchange established by the State under 1331 [i.e., 42 

U.S.C. § 18031].” 26 U.S.C. § 36B(b) (emphasis added). The 

cross-referenced provision – 42 U.S.C. § 18031 – contains 

language indicating that all States are required to establish an 

exchange under the section. See 42 U.S.C. § 18031(b)(1) 

(“Each State shall . . . establish an American Health Benefit 

Exchange . . . .”); see also id. § 18031(d)(1) (“An Exchange 

shall be a governmental agency or nonprofit entity that is 

established by a State.” (emphasis added)). In other words, if 

our statutory universe consisted only of these two provisions, 

it would be clear that § 36B intended that residents in all

States would receive subsidies because all States were 

required to create such exchanges by the section of the Act 

referenced in § 36B. 

Of course, the ACA is broader than just § 36B and 

§ 18031, and in 42 U.S.C. § 18041 it permits a State to elect to 

allow HHS to establish the Exchange on behalf of the State. In 

such circumstances, however, the Act requires HHS to 

establish and operate “such Exchange.” Id. § 18041(c) 

(emphasis added). The use of “such” can reasonably be 

interpreted to deem the HHS-created Exchange to be the 

equivalent of an Exchange created in the first instance by the 

State. That is, when HHS creates an exchange under 

§ 18041(c), it does so on behalf of the State, essentially 

standing in its stead. Put differently, under the ACA, an 

Exchange within a State is a given. The only question is 

whether the State opts to create the Exchange on its own or 

have HHS do it on its behalf. On this view, “established by the 

State” is term of art that includes any Exchange within a State. 

Indeed, the Act says as much when it defines the term

“Exchange” as “a governmental agency or nonprofit entity 
10

that is established by a State.” 42 U.S.C. § 18031(d)(1). It is 

clear that § 18031 is the source of the definition of the term 

“Exchange” under the Act. See 42 U.S.C. § 300gg-91(d)(21) 

(defining “Exchange” for purpose of Public Health Service 

Act to mean what it does in § 18031); id. § 18111 

(incorporating the definitions in § 300gg-91 for purpose of 

Title I of the ACA). It is also clear that § 18031 defines every 

“Exchange” under the Act as “a governmental agency or 

nonprofit entity that is established by a State.” Id.

§ 18031(d)(1) (emphasis added). Because § 18041(c) 

authorizes the federal government to establish “Exchanges,” 

the phrase “established by the State” in § 18031 must be broad 

enough to accommodate Exchanges created by the HHS on a 

State’s behalf. Section 36B expressly incorporates this broad 

definition of “Exchange” when it uses the phrase an 

“Exchange established by the State under [§ 18031].” 26 

U.S.C. § 36B(b) (emphasis added). Therefore, the phrase 

“established by the State” in § 36B is reasonably understood to 

take its meaning from the cognate language in the incorporated 

definition in § 18031, which embraces Exchanges created by 

HHS on the State’s behalf. See, e.g., Gustafson v. Alloyd Co., 

Inc., 513 U.S. 561, 570 (1995) (noting “the normal rule of 

statutory construction that identical words used in different

parts of the same act are intended to have the same meaning”

(internal quotation marks omitted)). These provisions belie the 

“plain meaning” that Appellants attempt to attribute to § 36B.

What is more, Appellants’ interpretation of the operative 

language in § 36B sits awkwardly with the section’s structure. 

Subsection (a) provides tax credits to any “applicable 

taxpayer,” defined in reference to the poverty line and without 

regard to what the taxpayer’s State has or has not done. 26 

U.S.C. § 36B(a), (c)(1)(A). Subsection (b) then establishes a 

numerical formula for calculating the amount of the subsidy. 

Id. § 36B(b). It is only in the context of this numerical formula 
11

and its definition of “coverage month” that the purported 

condition is found. Id. § 36B(b)(1), (c)(2)(A)(i). If Congress 

intended to create a significant condition on taxpayer 

eligibility for subsidies of the sort advocated by Appellants, 

one would expect that it would say so plainly and clearly. See 

Am. Trucking Ass’ns, 531 U.S. at 468. There is no “if/then” or 

other such conditional language in § 36B. Instead, if 

Appellants are to be believed, Congress thought it appropriate 

to incentivize significant State action (creating Exchanges) 

through an oblique and indirect condition. This is an 

implausible reading of the statute. 

The simple truth is that the phrase “established by the 

State” in § 36B does not have the plain meaning that 

Appellants would like. The inquiry does not end with a narrow 

look at § 36B. That provision must be read in conjunction with 

§ 18031(d)(1) and § 18041(c); and these provisions, read 

together, defy any claim of plain meaning. 

Furthermore, in order to address the question before us, 

this court is obliged to consider § 36B in “the broader context 

of the statute as a whole.” Robinson, 519 U.S. at 341; see also 

Zuni Pub. Sch. Dist. No. 89 v. Dep’t of Educ., 550 U.S. 81, 98 

(2007) (looking to “basic purpose and history” of statute). The 

Supreme Court’s recent decision in Michigan v. Bay Mills 

Indian Community, 134 S. Ct. 2024 (2014), which Appellants 

cite, is not to the contrary. See also Util. Air Regulatory Grp., 

2014 WL 2807314, at *9 (reaffirming that courts must bear “in 

mind the fundamental canon of statutory construction that the 

words of a statute must be read in their context and with a 

view to their place in the overall statutory scheme” (internal 

quotation marks omitted)). Nothing in Bay Mills or Utility Air 

Regulatory Group purport to undermine the commonsense 

principle – repeatedly endorsed by the Court – that the 

operative text must be understood in its statutory context, nor 
12

the subsidiary principle, which follows from the first, that 

evidence of meaning drawn from the broader statutory context 

can render the operative text ambiguous on a particular 

question of law. Appellants’ argument in this case is illogical

when cast in the context of the statute as a whole.

B. The Statute Read as a Whole

1. The “Three-Legged Stool” and the Indispensable 

Role of the Tax Subsidies 

Appellants’ interpretation is implausible because it would 

destroy the fundamental policy structure and goals of the ACA 

that are apparent when the statute is read as a whole. A key 

component to achieving the Act’s goal of “near-universal 

coverage” for all Americans is a series of measures to reform 

the individual insurance market. 42 U.S.C. § 18091(2)(D).

These measures – nondiscrimination requirements applying to 

insurers, the individual mandate, and premium subsidies –

work in tandem, each one a necessary component to ensure the 

basic viability of each State’s insurance market. Because 

premium subsidies are so critical to an insurance market’s 

sustainability, Appellants’ interpretation of § 36B would, in 

the words of Appellants’ amici, cause “the structure of the 

ACA [to] crumble.” Scott Pruitt, ObamaCare’s Next Legal 

Challenge, WALL ST. J., Dec. 1, 2013.

This point is essential and worth explaining in detail. The 

ACA has been described as a “three-legged stool” in view of 

its three interrelated and interdependent reforms. Br. for 

Economic Scholars at 7. The first “leg” of the ACA is the 

“guaranteed issue” and “community rating” provisions, which 

prohibit insurers from denying coverage based on health status 

or history, 42 U.S.C. § 300gg-1, and require insurers to offer 

coverage to all individuals at community-wide rates, id. 
13

§ 300gg(a). But such nondiscrimination provisions cannot 

function alone because of the problem of “adverse selection.”

When insurers cannot deny coverage or charge sick or highrisk individuals higher premiums, healthy people delay 

purchasing insurance (knowing they will not be denied 

coverage if and when they become sick), and insurers’ risk 

pools thus become skewed toward high-risk individuals (as 

they are the only ones willing to pay the premiums). The result 

is that insurers wind up paying more per average on each 

policy, which leads them to increase the community-wide rate, 

which, in turn, serves only to exacerbate the “adverse 

selection” process (as now only those who are really sick will 

find insurance worthwhile). This is the so-called “deathspiral,” which Congress understood would doom each State’s

individual insurance market in the absence of a multifaceted 

reform program. Nat’l Fed’n of Indep. Bus. v. Sebelius, 132 S. 

Ct. 2566, 2626 (2012) (Ginsburg, J., concurring in part and 

dissenting in part).

This is where the individual mandate, the second “leg” of 

the ACA, comes in. Congress recognized:

[I]f there were no requirement, many individuals would 

wait to purchase health insurance until they needed care. 

By significantly increasing health insurance coverage, the 

[individual coverage] requirement, together with the other 

provisions of this Act, will minimize this adverse 

selection and broaden the health insurance risk pool to 

include healthy individuals, which will lower health 

insurance premiums. The requirement is essential to 

creating effective health insurance markets in which 

improved health insurance products that are guaranteed 

issue and do not exclude coverage of pre-existing 

conditions can be sold.
14

42 U.S.C. § 18091(2)(I). Accordingly, the Act requires each 

individual who is not covered by an employer to purchase 

minimum coverage or to pay a tax penalty. 26 U.S.C. 

§ 5000A(a)-(b). But recognizing that individuals cannot be 

made to purchase what they cannot afford, Congress provided 

that the mandate would not apply if the cost of insurance 

exceeds eight percent of the taxpayer’s income after subsidies.

Id. § 5000A(e)(1). 

The third “leg” of the ACA is the subsidies. The subsidies

ensure that the individual mandate will have a broad enough 

sweep to attract enough healthy individuals into the individual 

insurance markets to create stability, i.e., to prevent an 

adverse-selection death spiral. Without the subsidies, the 

individual mandate is simply not viable as a mechanism for 

creating a stable insurance market: the lowest level of 

coverage for typical subsidy-eligible participants will cost 

23% of income, meaning that these individuals will be exempt 

from the mandate. Id.; Br. for Economic Scholars at 17-18.

Congress was informed of the importance of the subsidies to 

the overall legislative scheme. See Roundtable Discussion on 

Expanding Health Care Coverage: Hearing Before the Senate 

Comm. On Finance, 111th Cong. 504 (2009) (statement of 

Sandy Praeger, Comm’r of Insurance for the State of Kansas)

(“State regulators can support these reforms to the extent they 

are coupled with an effective and enforceable individual 

purchase mandate and appropriate income-sensitive subsidies 

to make coverage affordable.” (emphasis added)); see also 

CONGRESSIONAL BUDGET OFFICE, AN ANALYSIS OF HEALTH 

INSURANCE PREMIUMS UNDER THE PATIENT PROTECTION AND 

AFFORDABLE CARE ACT 24 (Nov. 30, 2009), (estimating that 

approximately 78% of people purchasing their own coverage 

would receive subsidies). It is thus no surprise that Congress 

provided generous subsidies in the ACA and, importantly, 

expressly linked the operation of the individual mandate to the 
15

cost of insurance after taking account of the subsidies. 26 

U.S.C. § 5000A(e)(1)(B)(ii). 

If nothing else, it is clear that premium subsidies are an 

essential component of the regulatory framework established 

by the ACA. If, as Appellants contend, a State could block 

subsidies by electing not to establish an Exchange, this would 

exempt a large number of taxpayers from the individual 

mandate, cause the risk pool to skew toward higher risk 

people, and effectively cut the heart out of the ACA. This is 

one of the points that was made in the joint opinion by Justice 

Scalia, Justice Kennedy, Justice Thomas, and Justice Alito in 

National Federation of Independent Business v. Sebelius:

Without the federal subsidies, individuals would lose the 

main incentive to purchase insurance inside the exchanges, 

and some insurers may be unwilling to offer insurance 

inside of exchanges. With fewer buyers and even fewer 

sellers, the exchanges would not operate as Congress 

intended and may not operate at all.

132 S. Ct. at 2674 (Scalia, Kennedy, Thomas, and Alito, JJ., 

dissenting) (emphasis added); see also Br. for the Appellees at 

38 (“Insurers in States with federally-run Exchanges would 

still be required to comply with guaranteed-issue and 

community rating rules, but, without premium tax subsidies to 

encourage broad participation, insurers would be deprived of 

the broad policy-holder base required to make those reforms 

viable.”). This “adverse selection” is precisely what Congress 

sought to avoid when it enacted the individual mandate. 42 

U.S.C. § 18091(2)(I). It is unfathomable that Congress 

intended to allow States to effectively nullify the individual 

mandate, which it recognized was necessary to the viability of 

an individual insurance market subject to the “guaranteed 

issue” and “community rating” requirements.
16

Section 36B cannot be interpreted divorced from the 

ACA’s unmistakable regulatory scheme in which premium 

subsidies are an indispensable component of creating viable 

and stable individual insurance markets. Due regard for the

carefully crafted legislative scheme casts § 36B in a clearer 

light. “Congress . . . does not alter the fundamental details of a 

regulatory scheme in vague terms or ancillary provisions—it 

does not, one might say, hide elephants in mouseholes.” Am. 

Trucking Ass’ns, 531 U.S. at 468. If Congress meant to deny 

subsidies to taxpayers in States with HHS-created Exchanges 

– thereby initiating an adverse-selection death-spiral that 

would effectively gut the statute in those States – one would 

expect to find this limit set forth in terms as clear as day. But 

the subsection defining which taxpayers are eligible for 

subsidies make no mention of State-established Exchanges. 

Subsidies are available to an “applicable taxpayer,” 26 U.S.C. 

§ 36B(a), and “applicable taxpayer” is defined as any 

individual whose household income for the taxable year is 

between 100% and 400% of the poverty line, id. 

§ 36B(c)(1)(A). 

A comparison with the ACA’s Medicaid expansion

condition offers a striking case in point. This condition 

demonstrates that Congress knew how to speak clearly and 

provide notice to States when it intended to condition funding 

on State behavior. The Medicaid provision lays out an express 

conditional statement in the form of “if, then”: “If the 

Secretary, after reasonable notice and opportunity for 

hearing,” determines that the State is not in compliance with 

the Medicaid-expansion requirements, the Secretary “shall 

notify such State agency that further payments will not be 

made to the State.” 42 U.S.C. § 1396c (emphasis added). This 

provision stands in stark contrast to § 36B. The formula for 

calculating subsidies does not say, for example, “If a State 
17

does not create an Exchange, its taxpayers shall be ineligible 

for premium credit subsidies,” or “If coverage is purchased on 

an Exchange established by HHS, premium credit subsidies 

will not be available.” Furthermore, § 1396c ensures that 

States receive notice before Medicaid funding is withheld. In 

contrast, there is no similar notice to States that their taxpayers 

will be denied subsidies if the State elects to have HHS create 

an Exchange on its behalf.

The majority thinks it unremarkable that Congress would 

condemn insurance markets in States with federally-created 

Exchanges to an adverse-selection death spiral. It reaches this 

conclusion by observing that, in peripheral statutory 

provisions, Congress has twice created insurance markets that 

suffered from the defect of having guaranteed issue 

requirements without the other measures (such as a mandate or 

subsidies) necessary to ensure the soundness of the market.

Congress did this, the majority notes, in the provisions 

covering the Northern Mariana Islands and other federal 

territories, see 26 U.S.C. § 5000A(f)(4); 42 U.S.C. § 201(f),

and in the Community Living Assistance Services and 

Supports (CLASS) Act, Pub. L. No. 111-148, §§ 8001-8002, 

124 Stat. 119, 828-47 (2010). 

This argument entirely misses the point. These peripheral 

statutory provisions say nothing about the core provisions of 

the ACA at issue here, as both the majority and the Appellants 

recognize. In both provisions, Congress purposely decided not 

to impose an individual mandate. That is a crucial difference.

The Government and supporting amici’s position in this case 

relies on Congress’ express recognition that the individual 

mandate, “together with the other provisions of this Act, will 

minimize . . . adverse selection,” and that, as such, the 

mandate “is essential to creating effective health insurance 

markets” with guaranteed-issue requirements. 42 U.S.C. 
18

§ 18091(2)(I) (emphasis added). This recognition, together 

with Congress’ linking the mandate to the subsidies available 

to taxpayers, 26 U.S.C. § 5000A(e)(1)(B)(ii), demonstrates 

that Congress appreciated that subsidies would be an integral 

part of ensuring that the individual mandate reached broadly 

enough to secure the viability of the insurance market. By not 

imposing individual mandates in the peripheral markets

identified by the majority (i.e., in the territories and the 

CLASS Act), Congress displayed a willingness to tolerate the 

risk that these markets would succumb to adverse selection. 

Congress displayed no such willingness here; in the markets 

covered by the core provisions of the ACA, Congress imposed 

an individual mandate linked to subsidies as an “essential” tool 

to ensure market viability. 42 U.S.C. § 18091(2)(I).

Appellants suggest that because Congress enacted 

peripheral statutory provisions covering territories and in the 

CLASS Act without including measures to ensure a broad base 

of healthy customers to stabilize prices and avoid adverse 

selection, it is reasonable to assume that Congress did the 

same thing with respect to the core provisions of the ACA. But 

this argument gets it backwards. The CLASS Act and the 

provisions covering the federal territories importantly 

demonstrate that when Congress determined to expose an 

insurance market to significant adverse selection risk, it 

specifically declined to enact an individual mandate. In other 

words, Congress acted intentionally when it passed the 

CLASS Act and the provisions covering the federal territories 

without an individual mandate. The core provisions of the 

ACA include an individual mandate, which of course indicates 

that Congress meant to treat the core provisions of the ACA 

differently.

Appellants’ arguments to the contrary are perplexing, to 

say the least. Congress’ omissions of an individual mandate –
19

which it recognized as an “essential” tool to prevent adverse 

selection, 42 U.S.C. § 18091(2)(I) – from the peripheral 

statutory provisions cited by the majority are not evidence that 

Congress had some monolithic statute-wide tolerance of the 

risk that insurance markets might succumb to adverse 

selection. To the contrary, Congress’ intentional omissions in 

these peripheral insurance markets of a tool it knew to be 

important to preventing adverse selection merely indicates that 

Congress had a substantially higher tolerance for the risk of 

adverse selection in such markets vis-à-vis the core markets 

where it did impose the individual mandate. The CLASS Act 

and the provisions covering the territories thus do not rebut the 

Government’s structural argument. Indeed, if anything, the 

subsequent history concerning the territories and the CLASS 

Act serve only to highlight that Congress was correct in its 

judgment that an individual mandate – accompanied by 

subsidies to ensure its scope was sufficiently large – was 

necessary to stave off adverse selection in insurance markets. 

As Appellants note, without an individual mandate, the 

CLASS Act was “unworkable,” which led Congress to repeal 

it. Reply Br. for Appellants at 15.

The Government and supporting amici’s structural 

argument in this case cannot be dismissed as idle meanderings 

into legislative history. It is apparent from the statutory text of 

the ACA that Congress understood (1) the importance of a 

broadly applicable individual mandate that works “together 

with the other provisions” to ensure the viability of an 

insurance market against the threat of adverse selection, 42 

U.S.C. § 18091(2)(I), and (2) the necessity of taxpayer 

subsidies to broaden the scope of the individual mandate, see 

26 U.S.C. § 5000A(e)(1)(B)(ii). In giving short shrift to the 

clear statutory scheme adopted by Congress when it enacted 

the core provisions of the ACA, the majority has ignored 

congressional intent and improperly rejected the reasonable 
20

interpretations of HHS and IRS. In sum, the majority has 

drawn the wrong lesson from the CLASS Act and the 

provisions covering federal territories, which demonstrate just 

the opposite of the conclusion reached by the majority.

2. The Advance Payment Reporting Requirements of 

§ 36B(f)(3)

One of the subsections in § 36B – which is the section 

upon which Appellants stake their case – makes it clear that 

Congress intended that taxpayers on HHS-created Exchanges 

would be eligible for subsidies. Subsection (f), entitled 

“Reconciliation of credit and advance credit,” tasks the IRS 

with reducing the amount of a taxpayer’s end-of-year premium 

tax credit under § 36B by the sum of any advance payments of 

the credit. 26 U.S.C. § 36B(f). Crucially, subsection (f) 

establishes reporting requirements that expressly apply to 

HHS-created Exchanges. Id. § 36B(f)(3) (citing 42 U.S.C. 

§ 18041(c)). These reporting requirements mandate that 

Exchanges provide certain information to the IRS, including 

the “aggregate amount of any advance payment of such 

credit”; information needed to determine the taxpayer’s 

“eligibility for, and the amount of, such credit”; and 

“[i]nformation necessary to determine whether a taxpayer has 

received excess advance payments.” Id. § 36B(f)(3)(C), (E), 

(F). The self-evident primary purpose of these requirements –

reconciling end-of-year premium tax credits with advance 

payments of such credits – could not be met with respect to 

Exchanges created by HHS on behalf of a State if these 

Exchanges were not authorized to deliver tax credits. Indeed, 

HHS-created Exchanges would have nothing to report 

regarding subsidies were they barred from giving any. It is 

thus plain from subsection (f) that Congress intended credits 

under § 36B to be available to taxpayers in States with HHScreated Exchanges.
21

Appellants’ attempts to minimize the importance of the 

reporting requirements are specious. They first argue that, 

even if credits are unavailable on federally-created Exchanges, 

the reporting provision would nevertheless serve a purpose: to 

enforce the individual mandate to buy insurance. This amounts 

to a sleight of hand. The argument ignores the clear purpose –

apparent from the statutory text – of subsection (f) and its 

reporting requirements. The purpose is front and center in the 

subsection’s title – “Reconciliation of credit and advance 

credit,” id. § 36B(f) – and is reinforced by the wording and 

structure of the provision. Consistent with its title, subsection 

(f) charges the IRS with reconciling the ultimate tax credit to 

be paid with any advanced payments of the credit, id. 

§ 36B(f)(1), including advance payments that “exceed the 

credit allowed” for the tax year, id. § 36B(f)(2). The IRS, of 

course, can accomplish these tasks only if it has adequate 

information, and the next paragraph, § 36B(f)(3), establishes 

the reporting requirements that ensure that the IRS has the 

information it needs to satisfy the terms of the statute. See id. 

§ 36B(f)(3)(C), (E), (F) (requiring disclosure of information 

concerning advanced payments of tax credits). Obviously, 

some of the information covered by subsection (f)(3) will also 

assist in enforcing the individual mandate. But much of the 

information required to be disclosed by subsection (f)(3) is 

irrelevant to the purpose hypothesized by Appellants (i.e., to 

enforcing the mandate). See id. § 36B(f)(3)(F) (mandating the 

reporting of “[i]nformation necessary to determine whether a 

taxpayer has received excess advance payments”); id. 

§ 5000A(e)(1)(A)-(B) (in determining whether an individual is 

exempted from the mandate, the statute takes account of the 

“amount of the credit allowable,” but not the amount of excess 

advance payments).
22

In a letter submitted to the court before oral argument, 

Appellants cited an IRS regulation, 26 C.F.R. § 1.6055-

1(d)(1), that addresses information reporting requirements. “In 

order to reduce the compliance burden on” insurers, the IRS 

decided not to require insurers “to report under section 6055 

for coverage under individual market qualified health plans 

purchased through an Exchange because Exchanges must 

report on this coverage under section 36B(f)(3).” Information 

Reporting of Minimum Essential Coverage, 79 Fed. Reg. 

13,220, 13,221 (Mar. 10, 2014). Appellants seem to think that 

this regulation somehow vindicates their view of § 36B(f)(3), 

but their argument makes no sense. That the IRS determined 

that additional reporting by insurers in specified circumstances 

was unnecessary does not imply that Congress drafted 

§ 36B(f)(3) solely to enforce the individual mandate, as 

Appellants would have it. What is clear here is that § 

36B(f)(3) establishes reporting requirements for the principal

purpose of requiring disclosure of information concerning 

advanced payments of tax credits, a purpose which cannot be 

squared with Appellants’ interpretation under which no credits 

are available on federally-created Exchanges.

Appellants also argue that the reporting provisions in 

subsection § 36B(f) are already over-inclusive because they 

apply to plans serving taxpayers who, by reason of their 

income, are ineligible for subsidies. The implication suggested 

by Appellants – and accepted too easily by the majority – is 

that the reporting requirements in § 36B(f)(3) already suffer 

from over-inclusiveness (since such taxpayers will have 

neither credits nor advance payments) and that there is thus 

little reason to be concerned about the additional overinclusiveness generated by Appellants’ interpretation of 

§ 36B. Framing the issue in this manner obscures a 

fundamental difference. Interpreting § 36B to foreclose credits 

on federally-created Exchanges would not merely increase the 
23

“over-inclusiveness” of § 36B(f)(3)’s reporting requirements; 

it would render certain of the reporting requirements pointless 

as to every single taxpayer on an HHS-created Exchange. This 

is a nonsensical interpretation because Congress enacted the 

§ 36B(f)(3) reporting requirements to apply to HHS-created 

Exchanges. Id. § 36B(f)(3) (citing 42 U.S.C. § 18041(c)). The 

provision is powerful evidence that Congress intended that tax 

credits be available on federally-created Exchanges.

3. Other Provisions

There are two other provisions of the ACA that strongly 

support the Government’s claim that the statute, read as a 

whole, permits taxpayers who purchase insurance in nonelecting States to receive subsidies. First, the statute defines a 

“qualified individual” as a person who “resides in the State 

that established the Exchange.” 42 U.S.C. 

§ 18032(f)(1)(A)(ii). There is no separate definition of 

“qualified individual” for States with HHS-created Exchanges. 

If an HHS-created Exchange does not count as established by 

the State it is in, there would be no individuals “qualified” to 

purchase coverage in the 34 States with HHS-created

Exchanges. This would make little sense.

Second, in a subparagraph entitled “Assurance of 

exchange coverage for targeted low-income children unable to 

be provided child health assistance as a result of funding 

shortfalls,” the ACA requires States to “ensure” that lowincome children who are not covered under the State’s child 

health plan are enrolled in a health plan that is offered through 

“an Exchange established by the State under [§ 18031].”

42 U.S.C. § 1397ee(d)(3)(B). Here again, the statute simply 

presumes that the existence of such State-established 

exchanges. The statute’s objective of “assur[ing] exchange 

coverage for targeted low-income children” would be largely 
24

lost if States with HHS-created Exchanges are excluded. There 

is nothing in the statute to indicate that Congress meant to 

exclude benefits for low-income children in the 34 States in 

which HHS has established an Exchange on behalf of the 

State.

* * *

In view of the foregoing, Appellants’ reliance on Bay 

Mills is entirely misplaced. In citing that case, Appellants

simply cherry pick language which appears favorable to their 

side but which does not reflect the Court’s reasoning. It is true, 

of course, that courts have no “roving license” to disregard a 

statute’s unambiguous meaning. 134 S. Ct. at 2034. This was 

an important point in Bay Mills because it was undisputed in 

that case that the plaintiff’s position could not be squared with

the plain meaning of the statute. And the plaintiff in Bay Mills

failed “to identify any specific textual or structural features of 

the statute to support its proposed result.” Id. at 2033 

(emphasis added). Bay Mills is plainly inapposite. Here, by 

contrast, there is considerable evidence – textual and structural

– to render the ACA ambiguous on the question whether 

§ 36B operates to bar tax subsidies in States in which HHS has 

established an Exchange on behalf of the State. And, as shown 

above, when the ACA is read as a whole – including its 

“textual [and] structural features,” “purpose,” “history and 

design,” id. at 2033-34 – it is clear that the Government’s 

interpretation of the ACA is permissible and reasonable, and,

therefore, entitled to deference under Chevron.
25

C. Appellants’ Extraordinary Subsidies-As-Incentive 

Argument

The foregoing examination of the statute shows that when 

the terms of § 36B are read “with a view to their place in the 

overall statutory scheme,” Nat’l Ass’n of Home Builders, 551 

U.S. at 666, Appellants’ plain meaning argument fails. 

Appellants obviously recognize that their argument resting on 

§ 36B in isolation, apart from the rest of the ACA, is 

ridiculous. This is clear because, in an effort to bolster their 

claim, Appellants proffer the extraordinary argument that 

Congress limited subsidies to State-run Exchanges as an 

incentive to encourage States to set up their own Exchanges. 

Br. for Appellants at 28. As noted above, this argument is 

nonsense. Appellants have no credible evidence whatsoever to 

support their subsidies-as-incentive theory.

The record indicates that, when the ACA was enacted, no 

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. Not one. Indeed no State

even suggested that a lack of subsidies factored into its 

decision whether to create its own Exchange. Br. of Members 

of Congress and State Legislatures at 24-25 & n.30 (citing 

authorities). “States were motivated by a mix of policy 

considerations, such as flexibility and control, and ‘strategic’

calculations by ACA opponents, not the availability of tax 

credits.” Id. at 24-25 n.30 (citing authorities). The fact that all 

States recognized and protested the Medicaid expansion 

condition, while no State raised any concern over the 

purported subsidy-condition shows that Appellants’ argument 

is at best fanciful. See Br. for the Appellees at 42 (“[T]he 

twenty-six plaintiff states in [Nat’l Fed’n of Indep. Bus., 132 

S. Ct. 2566,] repeatedly contrasted the Medicaid eligibility 

expansion with the ‘real choice that the ACA offers States to 
26

create exchanges or have the federal government do so.’” 

(quoting Br. for State Pet’rs on Medicaid, Florida v. HHS, No. 

11-400, 2012 WL 105551, at *51 (2012))).

The legislative history also indicates that Congress 

assumed subsidies would be available on HHS-created

Exchanges. First, earlier proposals for the legislation and an 

earlier version of the House Bill provided that the federal 

government would establish and operate Exchanges. Halbig v. 

Sebelius, 2014 WL 129023, at *17 (D.D.C. Jan. 15, 2014) 

(citing Reconciliation Act of 2010, H.R. 4872 §§ 141(a), 

201(a) (2010) (version reported in the House on March 17, 

2010); H. REP. NO. 111–443, at 18, 26 (2013)). When the 

legislation was modified so that States could operate their own 

Exchanges, the Senate Finance Committee expressly 

acknowledged that the federal government could “establish 

state exchanges.” Id. (citing S. REP. NO. 111–89, at 19 (2009) 

(“If these [state] interim exchanges are not operational within 

a reasonable period after enactment, the Secretary [of HHS] 

would be required to contract with a nongovernmental entity 

to establish state exchanges during this interim period.”)

(emphasis added)). 

In addition, the three House Committees with jurisdiction 

over the ACA legislation issued a fact sheet explaining that 

States would have a choice whether to create their own 

Exchanges or have one run by the federal government, and 

“the Exchanges” would make health insurance more 

affordable. The fact sheet recognized income level as the only

criteria for subsidy-eligibility. Br. for Members of Congress 

and State Legislatures at 11-12. The Joint Committee on 

Taxation also reported that the subsidies would be available to 

those who purchase insurance through “an exchange.” Id. at 

12. And Congressional Budget Office estimates assumed that 

subsidies would be available nationwide. Letter from Douglas 
27

W. Elmendorf, Director, CBO, to Rep. Darrell E. Issa, 

Chairman, House Committee on Oversight and Government 

Reform (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.” (emphasis added)). 

The truth is that there is nothing in the record indicating 

that, aside from wanting to afford States flexibility, Congress 

preferred State-run to HHS-run Exchanges. Appellants have 

not explained why Congress would want to encourage States 

to operate Exchanges rather than the federal government doing 

so, nor is there any indication that Congress had this goal. 

“[T]he purpose of the tax credits was not to encourage States 

to set up their own Exchanges. Indeed, making the tax credits 

conditional on state establishment of the Exchanges would 

have empowered hostile state officials to undermine the core 

purpose of the ACA, a result that [the] architects of the ACA 

wanted to avoid, not encourage.” Br. for Members of Congress 

and State Legislatures at 22.

Furthermore, Appellants assume without any basis that 

denying taxpayers premium subsidies would put political 

pressure on States to create Exchanges. This assumption runs 

counter to Appellants’ own theory of harm: After all, 

Appellants object to the subsidies because they impose 

additional financial obligations on individuals and employers

by triggering the individual mandate and assessable payments 

for employers. These obligations would not attach if the 

subsidies were not available in the State. Because the subsidies 

trigger additional costs for individuals and employers, it is not 

obvious that they would be popular among taxpayers or cause 

taxpayers to pressure their States to create Exchanges.
28

The single piece of evidence that Appellants cite to 

support their claim that Congress intended to restrict subsidies 

to State-run Exchanges is an article by a law professor. Br. for 

Appellants at 40 (citing Timothy S. Jost, Health Insurance 

Exchanges: Legal Issues, O’Neill Inst., Georgetown Univ. 

Legal Ctr., no. 23 (Apr. 7, 2009)). There is no evidence, 

however, that anyone in Congress read, cited, or relied on this 

article. 

III. CONCLUSION

The Supreme Court has made it clear that “[t]he plainness 

or ambiguity of statutory language is determined by reference 

to the language itself, the specific context in which that 

language is used, and the broader context of the statute as a 

whole.” Robinson, 519 U.S. at 341. We cannot review a 

“particular statutory provision in isolation . . . . It is a 

fundamental canon of statutory construction that the words of 

a statute must be read in their context and with a view to their 

place in the overall statutory scheme.” Nat’l Ass’n of Home 

Builders, 551 U.S. at 666. Following these precepts and 

reading the ACA as a whole, it is clear that the statute does not 

unambiguously provide that individuals who purchase 

insurance from an Exchange created by HHS on behalf of a 

State are ineligible to receive a tax credit. The majority 

opinion evinces a painstaking effort – covering many pages –

attempting to show that there is no ambiguity in the ACA. The 

result, I think, is to prove just the opposite. Implausible results

would follow if “established by the State” is construed to 

exclude Exchanges established by HHS on behalf of a State.

This is why the majority opinion strains fruitlessly to show 

plain meaning when there is none to be found.
29

The IRS’s and HHS’s constructions of the statute are

perfectly consistent with the statute’s text, structure, and 

purpose, while Appellants’ interpretation would “crumble” the 

Act’s structure. Therefore, we certainly cannot hold that that 

the agencies’ regulations are “manifestly contrary to the 

statute.” This court owes deference to the agencies’ 

interpretations of the ACA. Unfortunately, by imposing the 

Appellants’ myopic construction on the administering 

agencies without any regard for the overall statutory scheme, 

the majority opinion effectively ignores the basic tenets of 

statutory construction, as well as the principles of Chevron 

deference. Because the proposed judgment of the majority 

defies the will of Congress and the permissible interpretations 

of the agencies to whom Congress has delegated the authority 

to interpret and enforce the terms of the ACA, I dissent.