Court Opinion

ID: 8598585
Source: CourtListenerOpinion
Date Created: 2022-11-23 18:49:19.022484+00
Date Added: 2024-06-11T16:55:05.200903
License: Public Domain

WILLIAMS, Circuit Judge,
dissenting:
The Federal Employees Health Benefits Act prohibits States and their subdivisions from imposing a “tax, fee, or other monetary payment” “directly or indirectly” on “a carrier” “with respect to any payment made from the [Employees Health Benefits] Fund.” 5 U.S.C.A. § 8909(f)(1) (West 1996). Because West Virginia’s Health Care Provider Taxes, W. Va.Code Ann. § 11-27-1 to 11-27-36 (Michie 2002), are imposed indirectly on insurance carriers that participate in the Federal Employees Health Benefits Program (FEHBP), I respectfully dissent.
Judge Luttig reaches his decision by defining “indirect tax” as a tax on goods and relying on the Supreme Court’s refusal to apply economic pass-through theories to preemption of state taxes implied in the Constitution. Ante at 215. I disagree with both of these bases. First, even accepting Judge Luttig’s claim that “indirect tax” is a term of art synonymous with “a tax levied on goods,” § 8909(f)(1) clearly does not employ this term of art. The more natural reading of § 8909(f)(1) is that the adverb “indirectly” modifies “imposed,” thus describing a tax the economic burden of which falls on a carrier while the legal incidence does not.1 Second, while it *220appears that the Supreme Court has rejected economic pass-through theories in its jurisprudence regarding constitutional limits on a State’s power to tax,2 Congress clearly has the power to protect a federal program from the economic burden of a State tax, regardless of the tax’s legal incidence. See United States v. County of Fresno, 429 U.S. 452, 460, 97 S.Ct. 699, 50 L.Ed.2d 683 (1977) (“So long as the [State] tax is not directly laid on the Federal Government, it is valid if nondiscriminatory or until Congress declares otherwise.” (emphasis added)(internal citation omitted)); accord United States v. New Mexico, 455 U.S. 720, 737, 102 S.Ct. 1373, 71 L.Ed.2d 580 (1982) (“If [federal immunity from state taxation] is to be expanded beyond its narrow constitutional limits, it is Congress that must take responsibility for the decision, by so expressly providing as respects contracts in a particular form, or contracts under particular programs.”). As evidenced by the plain meaning of § 8909(f)(1),3 Congress intended to provide the Fund more protection from State taxes than it would receive from the implied limits in the Constitution: “No tax, fee, or other monetary payment may be imposed, directly or indirectly, on a carrier ... of an approved health benefits plan by any State ... with respect to any payment made from the Fund.” 5 U.S.C.A. § 8909(f)(1). Congress was clearly trying to avoid money from the Fund being used to shoulder the economic burden of certain State taxes.
Indeed, the Court has interpreted statutory language nearly identical to § 8909(f)(1) as prohibiting taxes that could be passed through. See Northwest Airlines, Inc. v. County of Kent, MI, 510 U.S. 355, 365, 114 S.Ct. 855, 127 L.Ed.2d 183 (1994). The statute at issue in Northwest Airlines, the Anti-Head Tax Act (AHTA), “prohibits States and their subdivisions from levying a ‘fee’ or ‘other charge’ ‘directly or indirectly’ on ‘persons traveling in air commerce or on the carriage of persons traveling in air commerce.’ ” Id. (quoting 49 U.S.C. § 1513(a)). The Court recognized that fees levied on airlines, such as “[Handing fees, terminal charges, and other airport user fees,” were levied indirectly on “persons traveling 1809 31 1 in air commerce or on the carriage of [such] persons.”4 Id. Similarly, while the *221legal incidence of West Virginia’s tax falls on the health care providers, because the economic burden ultimately will be shifted to the carriers, the tax is indirectly imposed on the carriers. In this case, we can say, without a doubt, that West Virginia’s Health Care Provider Taxes are imposed indirectly on at least two carriers participating in FEHBP because West Virginia has stipulated that “Morgan County War Memorial Hospital currently passes on the cost of West Virginia’s health care provider taxes ... to GEHA and Mail Handlers carriers.” (J.A. at 163.) West Virginia has also stipulated that “these carriers pass the cost on to the Employees Health Benefits Fund.” (J.A. at 163.)
Section 8909(f)(1), of course, does not preempt all fees and taxes that are indirectly imposed on a carrier. Rather, a tax is preempted under § 8909(f)(1) only if it is imposed with respect to a payment made from the Fund rather than some other source such as a state or private fund. To address whether West Virginia’s Health Care Provider Taxes are imposed with respect to a payment made from the Fund, a brief description of how the Fund works is helpful. Contributions are made to the Fund by the federal government and individual enrollees. 6 U.S.C.A. §§ 8906, 8909 (West 1996). Participating insurance carriers then pay the cost of health services for enrollees. 5 U.S.C.A. §§ 8902(a), 8903 (West 1996). The insurance carrier, in turn, draws money out of the Fund to cover claims and its expenses. 5 U.S.C.A. § 8909(a). West Virginia’s Health Care Provider Taxes are directly imposed on the gross receipts of health care providers. See, e.g., W. Va.Code Ann. § ll-27-9(b) (“The tax imposed in subsection (a) of this section shall be two and one-half percent of the gross receipts derived by the taxpayer from furnishing inpatient hospital services in this state.”). Any payments received from an enrollee or insurance carrier participating in FEHBP would thus be taxed as a portion of health care providers’ gross receipts. See, e.g., W. Va.Code Ann. § 11 — 27—9(c)(1) (“‘Gross receipts’ means the amount received or receivable, whether in cash or in kind, from patients, third-party payors and others for inpatient hospital services furnished by the provider....”). Because such payments ultimately will be reimbursed out of the Fund, West Virginia’s Health Care Provider Taxes are imposed “with respect to ... payment [s] made from the Fund.” Accordingly, to the extent West Virginia’s Health Care Provider Taxes are applied to receipts from a carrier participating in FEHBP, they are preempted.
In short, because West Virginia’s Health Care Provider Taxes are imposed indirectly on carriers with regard to payments *222made from the Fund, I would affirm the district court.

. It is a basic canon of statutory construction that all words in a statute are to be given effect. Under Judge Luttig’s interpretation of § 8909(f)(1), "directly and indirectly” are not given effect because both "direct taxes” and "indirect taxes” fall under the statute’s broad prohibition, which provides that "[n]o tax, fee, or other monetary payment may be imposed ... on a carrier.” Thus, to give effect to the term "indirectly,” § 8909(f)(1) must be construed to prohibit taxes the legal incidence of which falls on providers while the economic burden is shouldered by carriers. In the present case, I believe that the tax at issue is *220an indirect tax that is directly imposed on the providers but, to the extent that the economic burden is passed through, is indirectly imposed on the carriers.

.In some cases, however, the pass-through of the economic burden of a tax to the federal government is so clearly intentional that the tax is preempted under the Constitution, not because it is "indirectly imposed” on the government, but rather because the legal incidence is considered to fall on the government and the person who is legally liable for its payment is considered to be merely collecting the tax from the government for the State. See, e.g., United States v. State Tax Comm’n, 421 U.S. 599, 607, 95 S.Ct. 1872, 44 L.Ed.2d 404 (1975) ("The Tax Commission clearly intended — indeed, the scheme unavoidably requires — that the out-of-state distillers and suppliers pass on the markup to the military purchasers.”).

. Tellingly, although Judge Luttig mounts a strident attack against my interpretation of Northwest Airlines, he fails to offer any rejoinder to my textual analysis of § 8909(f).

. My description of the Court’s holding in Northwest Airlines does not, as Judge Luttig suggests, involve any "sleight of hand” or selective quotation. Rather, I have simply distilled the governing principles of that opinion — which are relatively straightforward— and described those governing principles as they pertain to the facts of this case. As stated by the Court in Northwest Airlines, the airport user fees at issue in Northwest Airlines were levied directly on the airlines. 510 U.S. at 355, 114 S.Ct. 855. The Court nonetheless concluded that the fees fit the definition of being "directly or indirectly” imposed on persons traveling in air commerce or on the carriage of such persons. *221Id. at 365, 114 S.Ct. 855. After all, the Court reminds us, in a previous case the Court had already concluded that " § 1513(a)’s compass is not limited to direct ‘head’ taxes.” Id. (emphasis added). Because the Court established that the fees at issue were levied directly on airlines for the use of the airport, and not directly on passengers or the carriage of passengers, it follows that the fees fit the description in § 1513(a) because they were indirectly levied on passengers or the carriage of passengers. Thus, my conclusion as to the persuasive value of the decision follows from a faithful reading of the decision itself; no manipulation or deceit is required or is employed. Indeed, unlike Judge Luttig, the dissent in Northwest Airlines had no difficulty discerning the purport of the majority’s analysis: "To be sure, the Act’s apparently broad ban on any fees, taxes, or charges imposed 'directly or indirectly, on persons traveling in air commerce,’ etc., superficially supports the [majority's] interpretation. Any cost an airline bears is in some sense an ‘indirect’ charge ‘on persons traveling in air commerce,' because the airline ultimately will pass that cost on to consumers in the form of higher ticket prices.” 510 U.S. at 376, 114 S.Ct. 855 (Thomas, J., dissenting) (emphasis in original).