238 A.3d 222
D.C.2020Background
- The ACA created state-run Exchanges and required that, by Jan. 1, 2015, a State "ensure" its Exchange is "self-sustaining," "including allowing the Exchange to charge assessments or user fees to participating health insurance issuers, or to otherwise generate funding." (42 U.S.C. § 18031(d)(5)(A)).
- The D.C. Council formed the Health Benefit Exchange Authority and Fund and enacted a "health carrier tax" assessing all health insurers doing business in D.C. with gross receipts ≥ $50,000, regardless of whether they offer plans on the Exchange; proceeds go to the Exchange Fund.
- A group of insurers that do not offer plans on the D.C. Exchange were assessed under the tax, paid under protest, and sued in D.C. Superior Court arguing (1) the ACA preempts the tax and (2) the Council unlawfully delegated legislative power to the Authority.
- A prior federal challenge to the same statute (ACLI) was dismissed for lack of jurisdiction by the D.C. Circuit, which held tax challenges to D.C. taxes belong in Superior Court; the Superior Court granted summary judgment for the District on the merits.
- The D.C. Court of Appeals affirmed: it held the ACA does not conflict-preempt the D.C. tax and that the delegation to the Authority satisfies the nondelegation ("intelligible principle") requirement.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Preemption under 42 U.S.C. § 18031(d)(5)(A) | §18031(d)(5)(A) requires the Exchange itself be "self-sustaining" and permits only assessments on participating issuers, so D.C. may not tax nonparticipating insurers. | The provision merely requires states to ensure Exchanges become self-sustaining after federal funding ends and allows flexibility to "otherwise generate funding," so D.C.'s tax is permitted. | The statute is ambiguous; read in context and with HHS guidance it allows state flexibility. The ACA does not conflict-preempt the D.C. health carrier tax. |
| Nondelegation (intelligible-principle) | The Council delegated legislative taxing power to the Authority without intelligible principles limiting its discretion to set assessments. | The statute identifies the implementing agency, the assessed group, caps total assessments to "reasonable projections" necessary to support the Exchange, limits fund use, requires accounting and reports—providing sufficient guidance. | Delegation is constitutional: the statutory scheme supplies intelligible principles and constraints; nondelegation challenge fails. |
Key Cases Cited
- King v. Burwell, 135 S. Ct. 2480 (2015) (summary of ACA Exchanges and federal subsidy framework)
- Am. Council of Life Insurers v. District of Columbia Health Benefit Exch. Auth., 815 F.3d 17 (D.C. Cir. 2016) (jurisdictional dismissal directing tax challenges to D.C. Superior Court)
- Mistretta v. United States, 488 U.S. 361 (1989) (nondelegation doctrine and intelligible-principle standard)
- Skinner v. Mid-Am. Pipeline Co., 490 U.S. 212 (1989) (upholding delegation where statutory criteria and limits guide agency discretion)
- Murray v. Motorola, Inc., 982 A.2d 764 (D.C. 2009) (framework for preemption analysis)
- Nat'l Cable Television Ass'n v. United States, 415 U.S. 336 (1974) (discussing limits on agency fees vs. taxes under federal law)
- Bostic v. District of Columbia Hous. Auth., 162 A.3d 170 (D.C. 2017) (state/local law supporting federal purpose is not preempted)