The AGs wrote that the challengers’ view would “violate basic principles of cooperative federalism by surprising the States with a dramatic hidden consequence of their Exchange election.” They continued, “Every State engaged in extensive deliberations to select the Exchange best suited to its needs. None had reason to believe that choosing a federally-facilitated Exchange would alter so fundamental a feature of the ACA as the availability of tax credits. Nothing in the ACA provided clear notice of that risk, and retroactively imposing such a new condition now would upend the bargain the States thought they had struck.”

The Obama administration’s brief makes a similar point, arguing that overturning the IRS rule on subsidies would disrespect “State sovereignty.”

“It would be astonishing if Congress had buried a critically important statewide bar to the subsidies under this landmark legislation in subclauses setting forth the technical formula for calculating how much the subsidy should be,” the brief, led by Solicitor General Donald Verrilli, said. “The Act should be interpreted to avoid the disrespect for State sovereignty inherent in petitioners’ reading.”