Halbig v. Burwell, No.14-5018 (D.C. Cir. 07/22/14) states its conclusion plainly. Section 36B of the Internal Revenue Code, part of the ACA makes tax credits available as a form of subsidy for those who purchase health from insurance exchanges “which are “established by the State . . .” (26 U.S.C. section 36B(c)(2)(A)(i)) These credits were awarded those with household incomes between 100% and 400% of the federal poverty line. (26 U.S.C. section 36B(c)(1)(A))

Under the ACA, exchanges were to determine which health plans were to be marketed and to enroll those who did not receive coverage through another mediate source. Primary responsibility for setting up the exchanges was given to the states. If a state had not set up its exchange by January 1, 2014, the HHS Secretary would establish the exchange for that state. (42 U.S.C. sections 18031(b)(1), 18041(c)(1))
14 states and the District of Columbia set up state exchanges and the federal government set up 36 exchanges for the remaining states. However, the IRS chose not to differentiate between state and federal exchanges and awarded the credit to all who qualified for it no matter which kind of exchange enrolled them. (26 C.F.R. section 155.20)

The case turns on a conflict between the clear words of a statute and the administrative agency interpreting it. The literal words of the statute conflict with the agency interpretation and therefore the latter is abrogated.

The conflict does not present a difference without consequences. The ACA establishes an individual mandate which requires minimum essential coverage and is enforced with a penalty. The penalty does not apply to individuals for whom the annual cost of the cheapest available coverage, minus tax credits, would exceed 8% of their projected household income. (26 U.S.C. section 5000A(c)(1)(A)-(B)) The IRS regulation expands tax credits to 36 more states and thereby increases the number who must purchase health insurance or pay a penalty.

The ACA also institutes an employer mandate. An employer with at least 50 employees will be penalized if it didn’t provide full-time employees with health insurance if the employees enroll in a qualified health plan for which an individual tax credit exists. (26 U.S.C. section 4980H(c)(2)(A)) Thus, the IRS regulation exposes more employers to penalties.

The court found that the statutory history of the ACA supported the literal limitation of credits to state exchanges. It rejected the government arguments that state and federal exchanges were legal equivalents under the ACA. The literal construction did not render the ACA unworkable, “let alone so unreasonable as to justify disregarding [the language]’s plain meaning.” The government’s “appeals to the ACA’s broad aims do not demonstrate that Congress manifestly meant something other than what [was legislated].”

The issue resolved itself into whether Congress’ statutory wording must be followed literally. The same issue has been raised by Speaker John Boehner in his discussion of a possible lawsuit against the President for failing to faithfully execute legislation. The apparent focus of this litigation is the President’s unilateral executive decision to postpone the employer mandate from December 31, 2013 to January 1, 2015 because of problems in administering the program.

Details concerning the purported lawsuit are not readily available. Presumably the plaintiff would be the Speaker, on behalf of the House, and he would be seeking a declaration that the postponement was contrary to law. The immediate difficulty (other than the fact that the case will be moot on January 1, 2015) is one that is discussed in Halbig, standing.

The irreducible constitutional minimum a plaintiff must show to establish standing is: (1) an injury in fact; (2) fairly traceable to the alleged conduct of the defendant; (3) that is likely to be redressed by the relief the plaintiff seeks. (Sprint Comm. v. APCC Services, 554 U.S. 269, 273-74 (2008)) In Halbig, one plaintiff sought to avoid purchasing insurance through his federal exchange. He alleged that but for the credit he would receive through the federal exchange, he would not be required to purchase insurance because of his income. The credit, if applied, would place him on the purchaser side of the 8% threshold. Holding that an injury in fact is “a concrete and particularized invasion of a legally protected interest,” (Sprint Comm. v. APCC Services, supra at 273) the court found that the allegations were sufficient to create standing.

As a plaintiff, the House of Representatives presents more difficulty that the Halbig defendant. For example, what is its injury and how is that injury different from the man on the street? Indeed, wouldn’t an employer actually affected by the mandate have better standing?

In any case, the discussion of standing is a cottage industry in legal academic circles. In addition, courts constantly explain the doctrine by reformulations which are not all congruent. The bedrock case, however, is Warth v. Seldin, 422 US 490 (1975).

In Warth, the Supreme Court took the widest possible analytical stance: “In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues. This inquiry involves both constitutional limitations on federal-court jurisdiction and prudential limitations on its exercise. , , , In both dimensions it is founded in concern about the proper—and properly limited—role of the courts in a democratic society. “

Therefore, “when the asserted harm is a ‘generalized grievance’ shared in substantially equal measure by all or a large class of citizens, that harm alone normally does not warrant exercise of jurisdiction. . . . [E]ven when the plaintiff has alleged injury sufficient to meet the “case or controversy” requirement, this Court has held that the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties.”

As mentioned above, discussions of standing fill whole case books and law journals and, particularly because there seems to be no satisfactory, concise, and unified articulation of the doctrine, nothing can be settled in this article. However, it is enough to note that Halbig, a case which clearly be settled in the Supreme Court before the Boehner lawsuit, presents a standing issue, albeit a common and easy one, in the context of the ACA.


Within hours after Halbig, the Fourth Circuit issued King v. Burwell, No. 14-1158.  King holds that within the context of the ACA, “the IRS Rule is a permissible construction of the statutory language” and therefore credits apply to all exchanges.   

At this point, the existence of two diametrically opposed opinions on this crucial feature of the ACA guarantee that if the opinions remain unchanged after en banc review in each Circuit, Supreme Court consideration is likely.

On the ancillary point of standing, the Fourth Circuit had little difficulty in finding that the plaintiffs, essentially identically situated as the Halbig plaintiff, had suffered a “concrete economic injury” sufficient to allow them to maintain the case.