Which in the context of thenly i terpre statute for the is a highly implausible interpretation. The when you look at the statute in the context of how it should be examined others confirm to is not at war atth the central purpose. So lets take a quick lookurpos. At the purpose when congresscest passed the Charles Willey fiercest critics concurred with the supporters to puhieve universal health carerp coverage which has michael panelist professor edwards wrote an article on addt theio subject and in additionm r the exchanges were a mechanism to achieve that it was n goal so not intel one 1 2, years after obama signed the aca into law is that and then to have the 180degree interpretation of the law mechanists some. Hael i but the text is in harmony. It did not intend there doesno not put the stake in the state hands of Health Reform forncere. Those that are very sincere i dont doubt that for a minute such as attorney general pruitt in the facted to stiffing the constituencytory that the act was to benefit. Eart that is not for the faint of all our i will try to summarize very clearly said gist of my a argumentum the the details to the written statement. Cus one. Mr. Chairman the opponents argument zeroes in on section 1401 which enacts a new section 36b of the Internal Revenue code and it targets a provision that is in their to define how to calculate the amount of premium assistance in that provision pegs the premium assistance amount to put monthly premiums for insurance policies which cover the taxpayer and which were enrolled in through an exchange established by the state under section 1311 of the aca. Its no wonder that it took a year and and a half to find this particular provision i must say. The theory of my colleagues here is that because this subsection calculates premiums for policies that are issued through an exchange established by the state under section 1311, therefore they say federally facilitated exchanges which are directed in another section of the act stand and where states fail to set up exchanges of their own cannot be considered their equivalent in their policyholders need premium assistance are left out in the cold. If this seems like an impossible interpretation it becomes much more so if one looks at the act as a whole, which i have done but im not going to go through all of the things that i have learned by doing that. Im going to focus on one provision which i feel particularly undermines these selfdefeating spin that my colleagues here with but on section 36b and section 1311. The section i would like to focus on the courses section 1321 and this is the section which says that if the state fails to establish an exchange then the secretary of health and Human Services shall establish and operate such exchange until take such actions are necessary to implement such other requirements. Now the key part of our position is simply that the use of the words such exchange and the use of exchange with a capital a map showing the defined term that the logical commonsense interpretation of that language is that the exchange under hhs stewardship shall remain as it would have been under state stewardship and shall be its functional equivalent and shall be subject to the same requirements and shall have the authority necessary to take such actions as are necessary to implement its functions. As the steward of such exchange our position is the secretary stands in stand in the shoes of our acts on behalf of of ed state government. This type of surrogacy were stewardship is commonplace and the law. And so that is what, that is what we feel 1321 and the statute as a whole contemplates. There is really no reason to impose this interpretation that professor adlers coauthor Michael Canon has said would ring obama cares Exchange Engines to a screeching hault. Mr. Lazarus i hate to interrupt you but how much time to let because we want to receive all of your statement. Have i overshot . I apologize. Apologize. Thats awry. Do you have a final statement . I certainly do. I just wanted to say that opponents recognize they need more than this textonly argument. They have gone through a purpose argument and they claim that the congress deliberately designed the exchange provisions so that they would essentially fail in the federal Exchange States and i would just like to suggest that is rather impossible to think that the aca sponsors and we are talking about people like harry reid, senator Chuck Schumer and max baucus would potentially turn it over to the aca opponents like attorney general pruitt the power to sabotage the law in their states but i think you have to think thats true in order to sustain the argument. Thank you mr. Lazarus. I apologize. Thank you mr. Chairman and members of the subcommittee. Thank you for the opportunity to testify today. The subcommittee has asked for my views on legal basis for the irs and Treasury Department rule purporting to extend tax credits and car sharing subsidies in the federal exchanges. I will be brief. There is none. The irs rule is directly contrary to plain language of the aec a and not authorized their love. The tax of section 14 through and that the entire akzo authorizes tax credits for the purchase of qualifying Health Coverage and by the state under this section 1311 of the act. Nowhere does the act authorized tax credits for the purchase of coverage and exchange established by the federal government. Attacks in the statute does not support the irish rule. Do not iris finalizes tax credit will it offered no substantive defense of his decision to extend tax credits through federal changes. A cursory statement verified no provision of tax credits are to identify any relevant legislative history to support its position. Hard to see how this rulemaking satisfied the apa requirements in recent decisionmaking. To this day neither the iris for supporters have been able to come up with the statement prayer to or contemporaneous to the packers passing of the act. There are many statements available in all 50 states as there are many statements at all 50 states would eagerly create and implement exchanges. There even statements that states be required to create exchanges. Something definitely federal government cannot compel. What there is not as a single statement saying the tax credit would be available in federal exchanges because no one assumed that the federal exchanges will be necessary which explains why they opted not provide any funding for the federal exchange months after the rule was issued after members of this committee that and others began to pass arguments in support of the iris rule. These arguments found spots of ambiguity that could be used to sustain the rule and ignore relevant statutory provisions. Some of these arguments are contradictory. None of these arguments can overcome the statues. My copanelist in his testimony misrepresents the timing and the substance of the argument i made by mr. Cannon and statutory provisions that undermine our argument is not based on a single provision but a careful reading of every provision in the statute. Indeed the only way to read the statute without generating surpluses, that is without generating language that must be rendered irrelevant is to recognize when the statute says established by the state it means established by the state. Some claim it would be observed to enact health care and state cooperation access to or in state coffers with federal policy. This is called sabotage. That is precisely what provisions of the active. The best example of this or the medicaid provisions. The medicaid provisions threaten to withhold not only the Medicaid Expansion but ill medicaid funding in a state if the state refused expansion. That would clearly have significant consequences on the most vulnerable populations. Even with the expansion the statute denies tax credits to the poorest of the working poor because there is a minimum income requirement. My copanilist may think this is a policy but its indisputable that this is in fact what the text of the statute does. Some say it would be absurd to oppose raising requirements without subsidizing health heale but that is also what multiple provisions of this act clearly and indisputably do such of his tax at provision. Some may think that the way the act was designed but that does not make it any less the law. The relevant statutory language was not an accident or an error. It was the choice of those in the senate to want state basic changes to play a key role in Health Care Reform. Others prefer the federal model. And has a had a built in enacted the model based on unconditional tax credits may tax credits may been the law of the land. After the of the filibuster proof majority in the senate apa opted to rely on the senate bill and its provisions clearly and expressly conditioning tax credits on cooperation. There was an air in believing that a majority of states with corporate and create their exchanges at their own expense. Such a miscalculation could not justify reweddings statute afterthefact that is what the irs has done. This rule is allowed to stand have fiscal and economic consequences. Whether not subsidy sound policy is not an issue. Whether the irs can unilaterally reread a lot entrusted to implement and enforce such tax credits are worthwhile and federal exchanges and congress may provide a statute. Thank you for your time and im willing to answer questions you might have. Thank you. As i mentioned before ms. Speier wind shear wessel has First Priority in an Opening Statement as well. Attorney general pruitt you mention the effect on the state of oklahoma as well as some businesses in oklahoma and individuals. Can you highlight that a little bit more . What is the effect of this . At this rule has is being proposed in the final rule if implemented what is the state effect on the state of oklahoma . With respect to the establishment of the state Health Health care exchanges to the law did not provide that choice under medicaid by 72 vote saying that the congress and the aca could not reduce the power of congress coerce and intimidate or threaten the state to expand medicaid at the risk of losing the entirety of medicaid so they are now to sovereign decision so states can make. One is whether to expand medicaid and webster. The state health care exchange. Mr. Chairman and arguments before the court in oklahoma we are arguing the decision that oklahomas has made the governor and legislature has balanced the convening interest of the penalties that would issue the state of oklahoma and the cost underrated trey burden of excess do they balance those factors i made a sovereign informed decision not to adopt the state health care exchange. The iris action effectively takes that decision away. Addition of the iris by rule in may of us says we will issue the subsidy and assess the employer mandate penalty. We think that is clearly takes away the decision to oklahomas me. As far as businesses and our state oklahoma is a large employer. Therefore we are subject to tax provisions. We are in the process of evaluating the cost of compliance and implementation and it made his decision as a state that we seek not to establish an exchange and avoid those costs and burdens and we make that argument as well. You make comments before between the state and the federal government. Can you elaborate on that . Under several Supreme Court precedence the Supreme Court is held at the federal government may not coerce the state to implement a federal program. Establish this principle and reaffirmed. What this means is the federal government wants the state to participate in or cooperate with a federal program and must offer inducement. One of the approaches we have seen as is for the federal government to threaten adverse economic treatment of private actors in the state if the state doesnt cooperate. Its what the text of the law does hereby withholding certain benefits to individuals and exchanges and Insurance Companies if they dont cooperate. You are saying this is not a compulsory think. This was a benefit put in front of them to say theres a consequence if you dont and a benefit if you do and the assumption of the government based on prior laws the consequence, the states will choose to do this on their own. That is something that is common and done in other portions of the statute. A the medicaid provisions for example operate in certain experts in Health Care Reform actually proposed this precise mechanism could be used as a way of cooperation and this would be an alternative to trying to find an additional pot of money to stay cooperative. Okay. Mr. Lazarus thank you for being here as well and your preparation. It seems in your Opening Statement you look at the laws of holland say congress is purpose or use the term that was the purpose or the intent of versus the actual textual reading of the statute that mr. Adler said as well. Can you identify you mentioned the statement that such Exchange Portion this section 1401 puts out the specific payment and specifically enumerates it has to be a state from 1311. Doesnt say from a state 1311 are federal from 1321. Is there a section of the text you look at them makes it plain that they should apply for federal apply for federal or taking it based on what you assume is the intent or the purpose of the laws the whole . Can you turn your microphone on as well please, sir . Im sorry. The text of the whole statute and i focus in particular on 1321 in the Exchange Language shows and should be interpreted to mean its a textual argument. Its not just some theoretical purpose point. That language should be interpreted to mean that a federally facilitated exchange stands in the shoes other than has all the same attributes and responsibilities as the state facilitated exchange. 1401 says statebased exchange like 1311. It should have also said statebased exchange like 1311 or 1321. Did need to say that because in 1321 where the federal exchange is explained and the rule is explained, it says the secretary shall establish and operate such an exchange. The words such is in reference to the exchange and 1311 and therefore its appropriate to interpret that to mean it becomes the same and furthermore mr. Chairman the fact that exchange in 1321 is capitalized is very important. That references back to the definition of what a Capital Exchange is which is made in 1311. Everywhere Capital Exchange for the capital a means it is referring to that defined concept. Thats the basic textual argument. Their other arguments such as the provision of the reconciliation supplement to the aca and after later in the year. That would have been later. We are running low on time. Can i make one comment on a little point . Im going to honor somebody remembers and we will come back. There will be other moments and with that i will recognize mr. Kosar. Thank you mr. Chairman. Can i get this light upon up on the screen, please . Mr. Adler in the background of 1401 section 36b the most important part of the statutory interpretation law the tax . Yes. Taxes the most them gordon part. Is it clear that tax credit should be linked to states that create their own exchanges and can you explain that . Its clear. In a relative provisions of this exchange and a Capital Exchange but then it goes on it goes on to say established by the state so even if one accepts that the Word Exchange in section 1401 references section 1321 is that it goes on to enumerate additional requirements. Air repeats the section number ,com,com ma section 1311 and on top of that is says established by the state in that state is capitalized and is also defined in the statute. And the interpretation offered by mike copanelists requires us to forget or ignore the fact that the statute and ignore the fact that the phrase established by estate is repeated authorizing the tax credits and i would go on to say in the reconciliation bill that amended the act congress recognized that it had to enumerate both section 1311 and section 1321 if that is what it meant so reporting requirements, the congress did not simply say exchange, did not simply say section 1311 exchange. The fact that section 1401 repeats the established by a state required means that even if we except the argument, we have this additional language we have to account for, and the only way his argument can work is if we ignore that language and ignore the expressly defined term in the statute which the testimony says we cannot do. I and my dentist, not an attorney. At the most people out in the real world want to hear it in plain terms. The administrations terminology was to drive individual exchanges so that you had all these 50 different marketplaces. Is that true . That was the intent of the senate bill. As we all know, there was a housesenate conference that may have been intending to make changes to that, but that bill was never brought out. Certainly the said bill that became law was designed test pass every state, create an exchange, and then to use this database exchanges as a means for providing subsidies. So summarized, the legislative history. Well, the history is entirely consistent with the intent to that to have states encourage states to create their own exchanges and to use state run exchanges as the mechanism for providing subsidies and tax credits, and that no provision was made for providing subsidies and taxpayers through federal exchanges, either in text or in the finding because we must remember that while the statute did authorize subsidies to states to help them set up exchanges initially, it provided for no funding for the creation of federal exchanges which further reaffirms no one thought the federal government would have to create exchanges. The secretary of health and Human Services repeatedly said that every state would do it and that is what people expected. What was the mistake here was not in the drafting of the law. It was not realizing the majority of states had no interest in creating their own exchange. Well was the consequence of scott browns election and massachusetts . That the senate bill be more specific. The senate bill adopted the state based exchange not model. It passed the senate. The plaintiff at the time was to have that bill go to a housesenate conference, commerce of the house bi