Argued: September 27, 2016
from the United States District Court for the Southern
District of Ohio at Columbus. No. 2:15-cv-00321-Algenon L.
Marbley, District Judge.
ARGUED: Frederick D. Nelson, OFFICE OF THE OHIO ATTORNEY
GENERAL, Columbus, Ohio, for Appellants.
B. Klein, UNITED STATES DEPARTMENT OF JUSTICE, Washington,
D.C., for Appellees.
BRIEF: Frederick D. Nelson, Eric E. Murphy, Peter T. Reed,
OFFICE OF THE OHIO ATTORNEY GENERAL, Columbus, Ohio, David P.
Fornshell, WARREN COUNTY PROSECUTOR, Lebanon, Ohio, Stuart
Kyle Duncan, SCHAERR DUNCAN LLP, Washington, D.C., for
B. Klein, Mark B. Stern, Samantha L. Chaifetz, UNITED STATES
DEPARTMENT OF JUSTICE, Washington, D.C., for Appellees.
Jeffrey A. Chanay, OFFICE OF THE KANSAS ATTORNEY GENERAL,
Topeka, Kansas, for Amicus Curiae.
Before: COLE, Chief Judge; DAUGHTREY and MOORE, Circuit
NELSON MOORE, Circuit Judge.
case involves a novel challenge to the Patient Protection and
Affordable Care Act ("Affordable Care Act" or
"ACA"), and presents us with the question of
whether one of the ACA's tax provisions applies to state
government employers with the same force that it applies to
private employers. Plaintiffs-Appellants the State of Ohio
and several of its political subdivisions and public
universities ("Ohio" or the "State")
filed suit against, inter alia, the United States Department
of Health and Human Services ("HHS"), alleging that
the Federal Government illegally collected certain monies
from the State in order to supplement the Affordable Care
Act's Transitional Reinsurance Program
("Program"). Arguing that the Program's
mandatory payment scheme applies only to private employers
and not to state and local government employers, Ohio sought
a refund of all payments made on its behalf and a declaration
that the Program would not apply to the State in the future.
Ohio also argued that application of the Program against the
State violated the Tenth Amendment to the United States
Constitution and principles of intergovernmental tax
immunity. The district court, in a thorough and reasoned
opinion, granted a motion to dismiss filed by the United
States, and denied a motion for summary judgment filed by
Ohio. The district court concluded that the Program applies
to state and local government employers just as it applies to
private employers, and that the Program as applied to Ohio
does not violate the Tenth Amendment. For the reasons stated
below, we AFFIRM.
enacted the Affordable Care Act in 2010 to address concerns
regarding nationwide access to affordable, quality
healthcare. King v. Burwell, __ U.S.__, 135 S.Ct.
2480, 2485-86 (2015) ("The Patient Protection and
Affordable Care Act adopts a series of interlocking reforms
designed to expand coverage in the individual health
insurance market."). Among the ACA's provisions are
(1) a tax credit to help individuals purchase health
insurance through public healthcare Exchanges; (2) a ban on
insurers considering an individual's health when deciding
whether to provide insurance or in setting the premium; and
(3) a requirement that each individual maintain insurance
coverage or remit payment to the Internal Revenue Service.
Id. at 2486-87. While many of the ACA's
requirements have been the subject of widespread litigation
and controversy, this case revolves around a lesser-known
provision, the Transitional Reinsurance Program. See
42 U.S.C. § 18061. The Program is a
premium-stabilization arrangement that aims to combat
volatility in the individual market by collecting payments
from "health insurance issuers" and "group
health plans" and distributing those payments over a
three-year period to health insurance issuers that cover
high-risk individuals in the individual market. See
Patient Protection and Affordable Care Act; HHS Notice of
Benefit and Payment Parameters for 2014 (Final Rule), 78 Fed.
Reg. 15, 410, 15, 411 (Mar. 11, 2013) ("The Affordable
Care Act establishes . . . a transitional reinsurance program
. . . to provide payments to health insurance issuers that
cover higher-risk populations and to more evenly spread the
financial risk borne by issuers."). Specifically, the
ACA mandates that:
In establishing the Federal standards under section 18041(a)
of this title, the Secretary, in consultation with the
National Association of Insurance Commissioners (the
"NAIC"), shall include provisions that enable
States to establish and maintain a program under which-
(A) health insurance issuers, and third
party administrators on behalf of group health plans, are
required to make payments to an applicable reinsurance entity
for any plan year beginning in the 3-year period beginning
January 1, 2014 (as specified in paragraph (3)[)], and
(B) the applicable reinsurance entity
collects payments under subparagraph (A) and uses amounts so
collected to make reinsurance payments to health insurance
issuers described in subparagraph (A) that cover high risk
individuals in the individual market (excluding grandfathered
health plans) for any plan year beginning in such 3-year
42 U.S.C. § 18061(b)(1) (footnote omitted); see also
id. § 18041(a)(1)(C), (c)(1) (providing that HHS
may establish reinsurance programs for states that decline to
do so). Ohio's reinsurance program is operated by HHS.
State of Ohio and several of its political subdivisions have
paid contributions (totaling approximately $5.4 million for
benefit year 2014) to the Program under protest.
Additionally, four state universities that have joined Ohio
in this suit (University of Akron, Shawnee State University,
Bowling Green State University, and Youngstown State
University) have paid nearly $765, 000 to the Program. R. 13
(Am. Compl. at 9-13) (Page ID #67-71).
approximately $25 billion in revenue that is expected to be
generated from the Program, $20 billion is paid to certain
health insurance providers to supplement those providers
covering high-risk individuals. 42 U.S.C. §
18061(b)(3)(B)(ii). The remaining five billion dollars are
"deposited into the general fund of the Treasury of the
United States and may not be used" for the Program.
Id. §§ 18061(b)(3)(B)(iii), (iv), and
term "health insurance issuer" as it applies to the