- In a highly-anticipated decision in Halbig v. Burwell, the U.S. Appeals Court this morning threw out the IRS regulation that implements vital ACA insurance subsidies, according to Reuters.
- According to the Court, "the ACA unambiguously restricts the ... subsidy to insurance purchased on Exchanges 'established by the state.'"
- If the decision stands, it will be up to state legislatures to decide whether or not to set up exchanges and make ACA subsidies available to residents. Although this is a blow to Obamacare, the decision will almost certainly be appealed, either to a full panel of the D.C. Circuit Court or to the Supreme Court. According to Modern Healthcare, experts say the earliest the high court would issue a ruling is spring 2015.
The debate behind the suit was in large part an argument of semantics. The Affordable Care Act mandates that federal subsidies are available to those individuals who purchased plans "through an Exchange established by the State under Section 1311." (Section 1311 created state-run exchanges.)
The plaintiffs argued that since the federal government is not a state, it should not be permitted to provide subsidies for insurance plans purchased through its own exchange—which it is currently doing in all 50 states under an IRS regulation proposed in 2011. Those subsidies, the plaintiffs argue, were established as an incentive for states to establish and maintain their own exchanges, taking the onus off of the federal government. Congress, according to the plaintiffs, did not intend for them to be available for plans purchased on the federal exchange.
As more and more state exchanges are floundering and states are shifting to the federal option, however, fewer and fewer people are eligible for subsidies under that interpretation. Currently, approximately 5 million people are using the subsidies, and 10 million are eligible for them.
Supporters of the IRS argued that the ACA language unambiguously permits the federal government to provide the subsidies. In January, the U.S. District Court for the District of Columbia upheld the policy. Judge Paul Friedman ruled that Section 1321, which says that "the Secretary shall . . . establish and operate such Exchange within the State," authorizes the federal government to operate a Section 1311 exchange.
The 4th Circuit Court of Appeals also handed down a ruling on an almost identical case today, King v. Burwell, ruling in favor of the federal government. The court called the IRS policy "a permissible exercise of the agency’s discretion." A district court in Virginia recently dismissed the case, saying there was no evidence that Congress intended for subsidies to be available only via state exchanges. The case was appealed to the 4th Circuit.
Two other similar cases are also pending, Pruitt v. Sebelius in Oklahoma and Indiana v. IRS in Indiana.
Want to read more? You might enjoy this infographic about the battle for premium subsidies in the wake of the split court decisions.