The U.S. Court of Appeals for the D.C. Circuit delivered a huge blow to Obamacare this morning, ruling that the insurance subsidies granted through the federally run health exchange, which covered 36 states for the first open enrollment period, are not allowed by the law.
The highly anticipated opinion in the case ofJacqueline Halbig v. Sylvia Mathews Burwell reversed a lower court ruling finding that federally run exchanges did have the authority to disburse subsidies.
Today’s ruling vacates the Internal Revenue Service (IRS) regulation allowing the federal exchanges to give subsidies. The large majority of individuals, about 86 percent, in the federal exchange system received subsidies, and in those cases the subsidies covered about 76 percent of the premium on average.
The essence of the court’s ruling is that, according to the law, those subsidies are illegal. They were always illegal, and the administration never had the authority to offer them. (According to an administration official, however, the subsidies willcontinueto flow throughout the appeals process.)
The court’s ruling agreed with challengers who argued that the plain language of the law, which in multiple instances limits subsidies and credits to any “Exchange established by the State,” does not allow subsidies to be disbursed in exchanges where a state declined to establish its own exchange and is instead run by the federal government. Basically, the federal government cannot step in and create and run an exchange that is somehow still an exchange established by a state.
Think this is interesting? Come to find out, a different circuit court ruled in quite a different direction on this same issue:
Update 2: A different circuit court ruled today that subsidies offered through federally run exchanges are authorized on the law. This creates a circuit court split, which increases, but does not guarantee, the chances of an eventual hearing by the Supreme Court. It is also possible, and arguably even more likely, that the circuit split will be dealt with via en banc review.