We Who Follow ACA Litigation will continue to be in business. [On September 19], Oklahoma’s Attorney General sought leave to amend the state’s original complaint regarding the individual mandate. Now the state claims that the tax subsidies offered to those qualifying for financial assistance to obtain insurance through the exchanges are impermissible. This amended complaint builds on an existing thread of new challenges that was promoted before NFIB was decided. (The amended complaint also asks the court to consider the state’s nullification law, which should be struck down based on the Supremacy Clause.) The ACA challengers that never advanced beyond district court have been seeking leave to amend their complaints with regularity. Last week I posted about the Pacific Legal Foundation’s new strategy, which is rooted in the Orgination Clause. (The case was also noted over at Balkinization.)
Oklahoma’s amended complaint is grounded in theories advanced by Jonathan Adler and the Cato Institute. The argument is that tax credits to support the purchase of health insurance through qualified health plans in the exchanges are only available when the exchanges are created by the states, not the federal government. They claim that section 1311 of the ACA only contemplated providing tax subsidies in state-run exchanges to incentivize states to create the exchanges and that the federally-established exchanges cannot offer the same tax benefit. In testimony to Congress, they argued the problem is that the proposed IRS regulation implementing the subsidies for people from 100-400% of the FPL in the exchanges applies to both state and federally-run exchanges, not just state exchanges. Thus, they claim that the IRS has exceeded its statutory authority. As Tim Jost noted here, the ACA did intend to permit tax credits in federal exchanges. I agree with Tim’s analysis and would add that the Anti-Injunction Act probably would apply to this provision; unlike the “penalty” of the individual mandate, this is actually described as a “tax.” Also, the states are not the appropriate parties to raise this issue; individuals benefit from tax credits, individuals would need to pursue the alleged problem.