A federal appeals court dealt a major blow to Obamacare today, ruling against the legality of some subsidies issued to people through the Affordable Care Act exchanges.
The ruling involves the states that did not set up their own marketplaces. The language in Obamacare actually restricts subsidies to state-run exchanges.
Only 14 states ran their own exchanges. The federal government took over for the 36 states that opted out of operating their own exchanges – and the court’s ruling says that the federal government may not pay subsidies for insurance plans in those states.
Those subsidies – with the federal government paying up to 100% of the premiums for certain insurance plans for people with low incomes – were the core of coverage expansion under the ACA.
Though the ruling is likely to be appealed, the decision threatens to gut the foundation of the law by potentially nixing subsidies that millions of people obtained through the federally run exchange known as HealthCare.gov.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled 2-1 that the IRS went too far in extending subsidies to those who buy insurance through that website.
“We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly,” the ruling stated.
The case, Halbig v. Burwell, is one of the first major legal challenges that cuts to the heart of the Affordable Care Act by going after the legality of massive federal subsidies and those who benefit from them.
The decision said the law “unambiguously restricts” the subsidies to insurance bought on state-run exchanges.
Nothing will change right away, according to an unnamed administration official:
“While this further review is ongoing, the premium tax credits will continue, unchanged.”
Even so, this decision will affect many:
The administration says 6.7 million people are getting tax credits to pay their premiums for insurance policies on the exchanges. Of these, 70 percent or 4.7 million are using a federal exchange.
A total of $1 TRILLION in subsidies is expected to be paid out over the next ten years.
The case could eventually land in the Supreme Court, which in 2012 upheld Obamacare’s constitutionality in a suit that addressed a different set of legal issues.
Politico reports that there are similar cases out there:
A virtually identical case is pending before the U.S. Court of Appeals for the 4th Circuit in Richmond, brought by four individuals who want to block Obamacare subsidies from Virginia’s insurance marketplace. But the Halbig ruling is considered more significant by legal scholars, as the D.C. court typically considers more questions of administrative law than the Virginia court.
State officials have also filed similar lawsuits in Indiana and Oklahoma, but neither case has yet been heard in court.
Because the ruling won’t actually go into effect until the court fully considers the administration’s request for an entire court review, the subsidies will still be given to federal exchange customers – for now.
From The Daily Caller:
The White House said in response that it will continue handing out the billions of taxpayer dollars in subsidies. White House press secretary Josh Earnest said that while the case continues to be battled out in the courts, the administration will continue to dole out billions in tax credits to federally-run exchange customers.
“It’s important for people all across the country to understand that this ruling does not have any practical impact on their ability to continue to receive tax credits right now,” Earnest said in a press briefing Tuesday.
If the ruling is upheld, then what? Will the 4.7 million impacted simply drop their coverage? Or will the states set up exchanges to help those people?
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Lily Dane is a staff writer for The Daily Sheeple. Her goal is to help people to “Wake the Flock Up!”