Monday’s Wall Street Journal has an editorial on the upcoming oral argument Tuesday in Halbig v. Sebelius, a challenge to an Internal Revenue Service regulation purporting to authorize tax credits and cost-sharing subsidies for insurers in health insurance exchanges established by the federal government.  The plain text of the PPACA says that such tax credits and subsidies are available for the purchase of qualifying health insurance in an exchange “established by the State under [Section] 1311.”  Under the IRS rule, however, subsidies are available in exchanges that are neither “established by the State” nor “established . . . under [Section] 1311.”

The WSJ editorial summarizes some of the arguments against the IRS rule that should be familiar to regular VC readers.

In 2012, HHS and the Internal Revenue Service arrogated to themselves the power to rewrite the law and published a regulation simply decreeing that subsidies would be available through the federal exchanges too. The IRS devoted only a single paragraph to its deviation from the statute, even though the “established by a State” language appears nine times in the law’s text. The rule claims that an exchange established on behalf of a state is a “federally established state-established exchange,” as if HHS is the 51st state. . . .

In administrative law, agencies are granted wide deference to interpret and resolve ambiguous statutes under the Chevron v. Natural Resources Defense Council standard, but here the text is clear, consistent and tightly worded: Subsidies in state-based exchanges only. There is also the so-called Yazoo standard, from a 1899 case, that holds that tax benefits “must be expressed in clear and unambiguous terms” and “unquestionably and conclusively” established.

The editorial also reports on some newer developments, such as a 28j letter submitted by the federal government suggesting that it would not stop providing tax credits should the plaintiffs prevail.

the Administration is suddenly claiming that the appeals court lacks the jurisdiction to invalidate its interpretation of ObamaCare. Last week the Justice Department submitted a so-called 28(J) letter, declaring that because Halbig is not a class action, any adverse ruling only applies to the named plaintiffs.

In other words, even if the court finds that the Administration is acting illegally, it cannot strike down the IRS-HHS rule and the executive branch will continue to ignore both Congress’s law and the law of the courts. There are few if any precedents for such a remarkable argument.

For the non-lawyers, a 28j letter is typically used to inform a court about “pertinent and significant authorities come to a party’s attention after the party’s brief has been filed.” (See FRAP 28(j).]  The only authority cited by this letter, however, is a Supreme Court case from 1999.  Michael Cannon has more on the DOJ’s letter here.

In another late-breaking development, a new IRS regulation concerning reporting requirements for exchanges directly contradicts a claim made in the government’s brief with regard to the PPACA’s reporting requirements. The government argues that the application of reporting requirements to federal exchanges shows congressional intent to provide tax credits in such exchanges.  The plaintiffs counter that these reporting requirements serve other functions, including data collection on the types of insurance people are obtaining and facilitating enforcement of the individual mandate.  In its brief before the D.C. Circuit (at p.28), the government claims such reporting for these other purposes would be superfluous because other provisions of the law already require such reporting by insurers.  The IRS appears to have a different view, however.  In a final rule promulgated March 10, the IRS says it is not requiring insurers to report the relativel information (which goes beyond eligibility for and payment of tax credits) because all exchanges must report this information.

For more on Halbig and the underlying issues, Michael Cannon has a great collection of links here.