D.C. Circuit Holds Healthcare Tax Credit Regs Are Invalid

[ Editor's Note: The D.C. Circuit on September 4, 2014, granted en banc review in this case and vacated this decision. The order is available at Doc 2014-21628.]

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 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, 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 brieffor 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.

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).

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., 467U.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.

Under section 36B, Exchanges also serve as the gateway to the refundable tax credits through which the ACA 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 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, 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.

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 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.

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 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 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.

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 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 manifestly meant something other than what section 36B says.

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 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."² 42 U.S.C. § 18043(a)(1). The absence of similar language in section 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 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.⁴ Indeed, we are particularly loath 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 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 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 federally-established 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."

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 Minimum Essential Coverage, 79 Fed. Reg. 13,220, 13,221 (Mar. 10, 2014); see 26 C.F.R. § 1.6055-1(d)(1).⁵ The 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), (c)(1)(A). A weakness common to both views of the availability of credits hardly serves as a basis for choosing between them.

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 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

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

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., 468U.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) ("[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 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 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., 489U.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 "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 three-legged 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.

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-nothing-compared-to-guam/. But HHS has nevertheless refused to exempt the territories from the guaranteed issue and 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 2013.¹²See American Taxpayer Relief Act of 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-heres-how/.

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 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 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.

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.

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).

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))).

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 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).

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 state-established 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).

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 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.

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 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.

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 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 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.

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 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.").

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.

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 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 self-defeating if taxpayers who purchase insurance from an HHS-created Exchange are deemed ineligible to receive subsidies. 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.

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, 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, 551U.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 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.

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.

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 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 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 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 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 common sense principle -- repeatedly endorsed by the Court -- that the operative text must be understood in its statutory context, nor 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

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. § 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 high-risk 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 "death-spiral," 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:

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 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:

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 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. § 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 -- 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 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.

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).

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 over-inclusiveness 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 "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.

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 low-income 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 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.

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 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 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.

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.

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.