American Council of Life Insurers v. District of Columbia Health Benefit Exchange Authority, 815 F.3d 17

The D.C. Health Benefit Exchange Authority (the Authority) faced a funding shortfall after opening in 2014 and, with emergency Council authorization, imposed a percentage charge on insurers’ premium receipts.
The charge applied to all insurance policies above a premium threshold, including products not sold on the exchange (e.g., long-term care), reducing the per-premium rate needed to fund the Authority.
The American Council of Life Insurers sued on behalf of nonparticipating insurers, raising statutory and constitutional challenges to the charge and arguing it was not a tax.
The District Court dismissed the complaint for failure to state a claim, rejecting those statutory and constitutional arguments.
On appeal the District argued the court lacked jurisdiction because the charge was a tax (and thus challenges fall within exclusive jurisdiction of the D.C. Superior Court Tax Division under D.C. law).
The D.C. Circuit analyzed whether the charge is a tax or a fee, focusing on whether there is a rough match between payers’ burdens and the benefits they receive.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Is the Authority’s charge a tax or a fee for jurisdictional purposes?	The charge is a fee tied to the Authority’s operations and regulatory costs, so federal court jurisdiction is proper.	The charge functions as a tax (broadly imposed and revenue-raising), so challenges must go to D.C. Superior Court Tax Division.	The charge is a tax because payers (many nonparticipants) receive no corresponding benefit and revenues are redistributed; federal court lacked jurisdiction.
What test defines tax vs. fee?	N/A (plaintiff disputes characterization, argues fee principles apply).	N/A (defendant relies on tax-characteristics and jurisdictional statutes).	Court adopts test emphasizing whether payment roughly matches benefit to payers; considers enacting body, breadth of payers, and use of revenue.
Does the Council/Authority’s labeling control ("assessment")?	Labeling as an assessment/fee indicates non-tax status.	Label not dispositive; substance controls.	Labels irrelevant; substance determines tax/fee classification.
Does partial legislative authorization affect classification?	N/A (plaintiff emphasized fee nature despite legislative role).	N/A (defendant noted Council involvement supports tax treatment).	Legislative direction to impose a percentage but delegation of rate-setting makes the factor neutral; benefit-burden mismatch is decisive.

Jenkins v. Wash. Convention Ctr., 236 F.3d 6 (2001) (federal courts must respect state or D.C. statutory grant of exclusive jurisdiction over tax challenges)
Floyd v. District of Columbia, 129 F.3d 152 (1997) (appellate courts have independent obligation to assure jurisdiction)
Empress Casino Joliet Corp. v. Balmoral Racing Club, Inc., 651 F.3d 722 (2011) (charges redistributed to unrelated beneficiaries characterized as taxes)
Valero Terrestrial Corp. v. Caffrey, 205 F.3d 130 (2000) (useful framework: tax if revenue-raising; fee if regulatory/punitive)
Trailer Marine Transp. Corp. v. Rivera Vazquez, 977 F.2d 1 (1992) (assessment that matches payers’ burdens to regulatory/compensation benefits treated as a fee)
San Juan Cellular Tel. Co. v. Pub. Serv. Comm’n of P.R., 967 F.2d 683 (1992) (charge to fund regulator’s expenses treated as a fee where correlation exists)
Bob Jones Univ. v. Simon, 416 U.S. 725 (1974) (broad programs with wide beneficiary base may nonetheless be taxes)
Dows v. City of Chicago, 78 U.S. (11 Wall.) 108 (1871) (historical principle against federal disruption of state revenue sources)