Oklahoma ex rel. Pruitt v. Burwell

51 F. Supp. 3d 1080, 2014 WL 4854543
CourtDistrict Court, E.D. Oklahoma
DecidedSeptember 30, 2014
DocketCase No. CIV-11-30-RAW
StatusPublished

This text of 51 F. Supp. 3d 1080 (Oklahoma ex rel. Pruitt v. Burwell) is published on Counsel Stack Legal Research, covering District Court, E.D. Oklahoma primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Oklahoma ex rel. Pruitt v. Burwell, 51 F. Supp. 3d 1080, 2014 WL 4854543 (E.D. Okla. 2014).

Opinion

ORDER

RONALD A. WHITE, District Judge.

I. Introduction

Before the court are the cross-motions of the parties for summary judgment. This lawsuit is a challenge to a federal regulation. The Patient Protection and Affordable Care Act (“ACA” or “the Act”) regulates the individual health insurance market primarily through “Exchanges” set up along state lines. An Exchange is a means of organizing the insurance marketplace to help individuals shop for coverage and compare available plans based on price, benefits, and services.

Specifically, Section 1311(b)(1) of the ACA requires that “[e]ach State shall, not later than January 1, 2014, establish an American Health Benefit Exchange ... for the State.” See 42 U.S.C. § 18031(b)(1). This directive, however, runs afoul of the principle that Congress cannot compel sovereign states to implement federal regulatory programs. See Printz v. United States, 521 U.S. 898, 925, 117 S.Ct. 2365, 138 L.Ed.2d 914 (1997). The Act also provides, therefore, that states may choose not to establish such Exchanges. Oklahoma has so chosen. Under section 1321 of the Act, each state may “eleet[ ] ... to apply the requirements” for the state exchanges, or if “a State is not an electing State ... or the [Health and Human Services] Secretary determines” that the State will fail to set up an Exchange before the statutory deadline, “the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate stick Exchange within the State.” See 42 U.S.C. § 18041(b)-(c). (emphasis added).

Additionally, Congress authorized federal subsidies (in the form of tax credits) paid directly by the Federal Treasury to the taxpayer’s insurer as an offset against his or her premiums. See 26 U.S.C. § 36B; 42 U.S.C. § 18082(c). The Act provides that a tax credit “shall be allowed” in a particular “amount,” 26 U.S.C. § 36B(a), based on the number of “coverage months of the taxpayer occurring during the taxable year.” 26 U.S.C. § 36B(b)(1). A “coverage month” is a month during which “the taxpayer ... is covered by a qualified health plan ... 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). The subsidy for any [1084]*1084particular “coverage month” is based on premiums for coverage that was “enrolled in through an Exchange established by the State under [section] 1311 of the ACA.” 26 U.S.C. § 36B(b)(2)(A) (emphasis added).

Further, the Act contains an “employer mandate.” This provision may require an “assessable payment” by an “applicable large employer” if that employer fails to provide affordable health care coverage to its full-time employees and their dependents. See 26 U.S.C. § 4980H(a)-(b). The availability of the subsidy also effectively triggers the assessable payments under the employer mandate, inasmuch as the payment is only triggered if at least one employee enrolls in a plan, offered through an Exchange, for which “an applicable premium tax credit ... is allowed or paid.” Id. Oklahoma contends it has standing in this case (among other reasons) because it constitutes an “applicable large employer” and the receipt of tax credits by any of its employees would trigger its liability for a penalty under that provision for failure to provide adequate coverage to those employees.

This contention arises because the Internal Revenue Service (“IRS”) has promulgated a regulation (the “IRS Rule”) that extends premium assistance tax credits to anyone “enrolled in one or more qualified health plans through an Exchange.” 26 C.F.R. § 1.36B-2(a)(l). It then adopts by cross-reference an HHS definition of “Exchange” to include any Exchange, “regardless of whether the exchange is established or operated by a State ... or by HHS.” 26 C.F.R. § 1.36B — l(k); 45 C.F.R. § 155.20. In other words, the IRS Rule requires the Treasury to grant subsidies for coverage purchases through all Exchanges — not only those established by states under § 1311 of the Act, but also those established by HHS under § 1321 of the Act. The IRS Rule is under challenge in this case, with plaintiff arguing that the regulation is contrary to the statutory language.

II. Justiciability

As a threshold matter, the court must address defendants’ assertion that plaintiffs challenge to the regulation is not justiciable.2 It is the plaintiffs burden to establish the court’s subject matter jurisdiction by a preponderance of the evidence. Showalter v. Weinstein, 233 Fed.Appx. 803, 807 (10th Cir.2007). One branch of defendants’ argument is that plaintiff lacks standing to sue.3 “Article III standing .is a prerequisite to every lawsuit in federal court.” Bishop v. Smith, 760 F.3d 1070, 1088 (10th Cir.2014). “To establish Article III standing, a plaintiff must show: (1) that it has suffered a concrete and particular injury in fact that is either actual or imminent; (2) the injury is fairly traceable to the alleged actions of the defendant; and (3) the injury will likely be redressed by a favorable decision.” Kerr v. Hickenlooper, 744 F.3d 1156, 1163 [1085]*1085(10th Cir.2014).4 Defendants move for judgment on the grounds that (1) Oklahoma does not suffer an injury in fact from the regulation and (2) even if Oklahoma suffered an injury in fact, that injury would not be redressable here.

The Act’s “assessable payments” under the employer mandate are only triggered if at least one full-time employee obtains a subsidy by purchasing insurance on an Exchange. 26 U.S.C. § 4980H(a)(2). Oklahoma has not established its own Exchange, and therefore state employees would not be eligible for subsidies if not for the IRS Rule. Accordingly, the State of Oklahoma would, if not for the IRS Rule, face no risk of incurring penalties under the employer mandate.

As a result of the IRS Rule, however, the State of Oklahoma’s employees now are eligible for the subsidies. Plaintiff contends that, as an employer,5 it could face penalties if just one employee receives a federal subsidy.

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Bluebook (online)
51 F. Supp. 3d 1080, 2014 WL 4854543, Counsel Stack Legal Research, https://law.counselstack.com/opinion/oklahoma-ex-rel-pruitt-v-burwell-oked-2014.