I spoke on March 6 to Timothy Stolzfus Jost, a law professor at Washington and Lee University, about this provision, which he first highlighted in September 2011, immediately after one of the King masterminds, Jonathan Adler, published the nucleus of the King case. The exchange was prompted by an IRS rule, proposed in August 2011 and finalized in May 2012, that authorized the federal exchanges to award premium subsidies.
In that 2011 piece, Jost acknowledged a "drafting error" in the ACA provision that neglected to include the FFEs while laying out the process of calculating individuals' subsidies. But, Jost wrote,
we do not need to rely on the courts to correct this error. Congress corrected it itself.In a subsequent post, Jost noted, "As a later-adopted statute, HCERA would take precedence over PPACA if there were a contradiction."
Four days after Congress passed the Patient Protection and Affordable Care Act, it enacted the Health Care and Education Reconciliation Act of 2010. Section 1004 of HCERA amended section 36B(f) of the IRC to impose on exchanges established under section 1311(f)(3)—that is, state exchanges—and under section 1321(c)—that is federal exchanges, the obligation to report to the IRS and to the taxpayer information regarding tax credits provided to individuals through the exchange. In this later-adopted legislation amending the earlier-adopted ACA, Congress demonstrated its understanding that federal exchanges would administer premium tax credits.
Last November Jost co-authored a law review article chronicling dozens of core ACA provisions that would be rendered nonsensical by barring the federal exchange from the crediting of subsidies. Again, though, 36b(f) is the only ACA provision that directly names the federal exchange in the subsidy context, and so should quell the narrowest literal reading of the language crediting subsidies only to "an exchange established by a state."
My conversation with Jost about this key provision follows.
Andrew Sprung: The provision you first highlighted more than three years ago, requiring the FFEs to report detailed subsidy data, seems a natural one to cite in response to claims that the ACA unambiguously authorizes credits to flow only through state exchanges. Why didn't it come up in oral argument?
Timothy Jost: When you're up there in front of the Court you don't have much chance to get a word in edgewise. They ask the questions and you respond, and every now and then things quiet down for a moment and you can say something. There was a point where Solicitor General Verrilli was able to discuss anomalies in the statute that resulted from the plaintiff's interpretation, but there are so many of them that he did not pick this one.
Sprung: Justice Kennedy first raised the issue of coercion, giving a lift to ACA supporters, but then he qualified that by allowing that the statute may simply, unambiguously say what the plaintiffs claim it does.Would 36B(f) at least get you to ambiguity?
Jost: Obviously. Yes. I'm just looking at it now. The title of the section is "Reconciliation of credit and advance credit." That's what the information is for, and if you look at the information that's going to be reported -- the level of coverage, the period of such coverage, the total premium without regard to the credit, the aggregate amount of the credit, any information provided to the exchange regarding change of circumstances [which would alter the credit amount]... the plaintiffs' idea is that the FFE is supposed to put down 0,0,0 and to do this several million times, because these forms (the 1095a) go not only to the IRS but also to all the taxpayers.
Here is the relevant text from what was originally HCERA 1004 (now Section 36B(f) of the IRS code as altered by the ACA, titled "Reconciliation of credit and advance credit"):
- (c) No Excess Payments- Section 36B(f) of the Internal Revenue Code of 1986, as added by section 1401(a) of the Patient Protection and Affordable Care Act, is amended by adding at the end the following new paragraph:
- `(3) INFORMATION REQUIREMENT- Each Exchange (or any person carrying out 1 or more responsibilities of an Exchange under section 1311(f)(3) or 1321(c) of the Patient Protection and Affordable Care Act) shall provide the following information to the Secretary and to the taxpayer with respect to any health plan provided through the Exchange:
- `(A) The level of coverage described in section 1302(d) of the Patient Protection and Affordable Care Act and the period such coverage was in effect.
- `(B) The total premium for the coverage without regard to the credit under this section or cost-sharing reductions under section 1402 of such Act.
- `(C) The aggregate amount of any advance payment of such credit or reductions under section 1412 of such Act.
- `(D) The name, address, and TIN of the primary insured and the name and TIN of each other individual obtaining coverage under the policy.
- `(E) Any information provided to the Exchange, including any change of circumstances, necessary to determine eligibility for, and the amount of, such credit.
- `(F) Information necessary to determine whether a taxpayer has received excess advance payments.'.