Court Rules That Subsidies in Obamacare’s Federal Exchange are Illegal, Dealing Huge Legal Blow to Health Law
Peter Suderman|Jul. 22, 2014 10:33 am
Whitehouse.govThe 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 of Jacqueline Halbig v. Sylvia Mathews Burwellreversed a lower court ruling finding that the federally run exchange did have the authority to disburse subsidies.
Today’s ruling vacates the Internal Revenue Service (IRS) regulation allowing the federal exchange to give subsidies. The large majority of individuals, about 86 percent, in the federal exchange 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. (According to an administration official, however, the subsidies will continue through 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.
“We conclude that appellants have the better of the argument: a federal Exchange is not an ‘Exchange established by the State,’ and [the relevant section of the law] does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges,” the decision says.
https://reason.com/blog/2014/07/22/court-rules-that-subsidies-in-obamacares
