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Whipsaw: 4th Circuit upholds Obamacare federal exchange subsidy after D.C. Circuit rejects

Whipsaw: 4th Circuit upholds Obamacare federal exchange subsidy after D.C. Circuit rejects

Split in Circuits virtually guarantees Supreme Court will take case.

Contrary to the D.C. Circuit decision today, the 4th Circuit upholds the Obamacare federal exchange subsidy. Maybe the Obama admin knew about the opinion, which would explain why it was so confident subsidies would flow pending court cases.

This all but guarantees the Supreme Court will take the case since there is a split in the Circuits.

From the opinion intro (emphasis added):

The plaintiffs-appellants bring this suit challenging the validity of an Internal Revenue Service (“IRS”) final rule implementing the premium tax credit provision of the Patient Protection and Affordable Care Act (the “ACA” or “Act”). The final rule interprets the ACA as authorizing the IRS to grant tax credits to individuals who purchase health insurance on both state-run insurance “Exchanges” and federally-facilitated “Exchanges” created and operated by the Department of Health and Human Services (“HHS”). The plaintiffs contend that the IRS’s interpretation is contrary to the language of the statute, which, they assert, authorizes tax credits only for individuals who purchase insurance on state-run Exchanges. For reasons explained below, we find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion. We thus affirm the judgment of the district court.

Obamacare Federal Exchange Subsidy Ruling – 4th Circuit


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Well, that was fast – it’s almost like they knew what was going to happen, huh?

How quickly will the SCOTUS take this up? WILL they take this up? Do we need to worry about which side of the bed Kennedy and Roberts get up on the morning of the final decision?

    Sam in Texas in reply to teresainfortworth. | July 22, 2014 at 2:18 pm

    The auguries are not good. Remember, one of the major reasons Bush at al. picked Roberts was because of his history of deference to the executive and legislative branches.

      sequester in reply to Sam in Texas. | July 22, 2014 at 3:37 pm

      If Roberts is deferential, he will have to defer to the plain and unambiguous written language of the bill. Otherwise he sanctions wholesale rewriting of laws.

      Perhaps Pelosi’s famous words will come back to haunt

      “We Have to Pass the Bill So That You Can Find Out What Is In It”.

      Legislative intent is useful, only in the case of clear ambiguity. Here Pelosi eschews legislative intent in favor of the writing.

        LoneMarauder in reply to sequester. | July 22, 2014 at 4:04 pm

        Roberts has *already* sanctioned the wholesale rewriting of laws. Remember the whole “fine vs. tax” fiasco?

Allowing the IRS to exercise discretion over the law controlling 1/7th of our economy. What could go wrong?

This all my be a moot point because the IRS hard drives that hold all the subsidy information will crash soon, and the backups will have been erased. So everyone will get subsidies. Except conservatives.

There is no law in this land anymore. There is only politics.

I have a question that could theoretically (though admittedly unlikely) have an impact here.

Assume this is kicked up to the Supreme Court. One of the judges recuses (like Justice Roberts, because he’s having a bad hair day). If the vote is then 4-4, that leaves two Appeals Court decisions at odds with one another and no final judgment.

Where would things stand?

    janitor in reply to fmc. | July 22, 2014 at 1:13 pm

    The law would be upheld.

      Sam in Texas in reply to janitor. | July 22, 2014 at 2:14 pm

      I am not sure that is correct. With a SCt vote at 4-4 the lower court decision being appealed is left standing as is. That would mean that the 4th and DC, and 5th, CA decisions would all remain in effect.

      My understanding is that in that case the rule in the various circuits would be according to the CA decision. For the 4th, state and federal exchanges both get the subsidy for states in that circuit, for the DC CA, a DC exchange could get the subsidy but not a federal exchange for DC (only), and for the 5th, if it decides like the 4th then both get subsidies for the states in that circuit but if it decides like the DC circuit then only state exchanges get the subsidy for states in that circuit and federal exchanges do not.

      The reason the SCt takes cases with a conflict between circuits is to resolve the conflict so there is only one rule nationwide, not up to 12 rules for the 12 circuits (11 + DC).

        “There can be only one” seems more logical. Otherwise we don’t have equality under the law. You’d think Democrats would be in favor of that.

        Having said that, this ended up in court because the Feds created their own exchanges that were outside the text of the law. So while I agree that “The law would be upheld”, the question then becomes, “What law do we uphold?” (This will be true even if the court ultimately upholds Obamacare. )


“we find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion.”

Who needs an elected legislature to make laws when we have unaccountable bureaucrats in the IRS to do it for us?


    PersonFromPorlock in reply to Observer. | July 22, 2014 at 1:26 pm

    “Who needs an elected legislature to make laws when we have unaccountable bureaucrats in the IRS to do it for us?”

    Well, unaccountable bureaucrats and a respectful judiciary. Let’s not shortchange the system.

      And after watching the recent congressional hearings on how the IRS deliberately targeted Tea Party and conservative applicants for brazen political purposes, we can understand why the courts would be so respectful of the IRS, and so eager to expand the IRS’ power.

      If ever there was an executive-branch agency that deserved to be able to share in congress’ exclusive power to write laws, it’s the IRS!

      What could possibly go wrong?

    Sanddog in reply to Observer. | July 22, 2014 at 2:45 pm

    I’m not sure why a court would give deference to the IRS over the Congress who actually wrote the damned law.

Midwest Rhino | July 22, 2014 at 1:21 pm

So they think the law written was full of ambiguity and contradictions, so they want bureaucrats to completely rewrite it as they see fit?

I have no clue if there is precedence on this, but it seems the 41 big changes to the law already, mean it is bad law. It was passed without being read or even written. Shouldn’t “bad law” be struck down and legislated over again, rather than constantly rewritten by leftist bureaucrats?

We need to know just why they wrote the rule that only state run exchanges got the subsidy. It seems there was a deliberate reason, so it can’t just be changed without going back to Congress. It’s not like Congress no longer exists … the only problem (for these leftist judges) is that it is no longer in complete Democrat control.

SCOTUS should take it up and reject subsidy for the federal run exchanges, per my free counsel. 🙂

    onlyabill in reply to Midwest Rhino. | July 23, 2014 at 11:07 am

    We need to know just why they wrote the rule that only state run exchanges got the subsidy.

    They wrote it that way because they wanted the states to setup their own exchanges. You setup an exchange and your residents get off-sets. You make us (the feds) set one up for you and “no money for your residents and they will hate you and elect Democrats”. It didn’t work out that way, too many states said stuff it and so they decided to give credits to users of the fed exchanges too. As other said, they are just making it up as they go now.

If the 5th Circuit upholds the subsidies after an en banc review, I bet the supreme court won’t even take it up. That’s because 2 circuits will have upheld at that point. The dissent from the 3rd judge is disturbing in the 5th circuit. Apparently Americans are no longer governed by Rule of Law, but rather Rule of Context and Intentions.

Now we know why Harry Reid invoked the nuclear option.


I will not submit; I will not comply.

The language of the law seems pretty clear … just where is the ambiguity?

Conservatives rooting for millions of people to lose their health insurance – over a typo. And the law will stand anyway. Unless the activists Supremes overrule Chevron. Right in time for the midterms.

    healthguyfsu in reply to Gus. | July 22, 2014 at 3:17 pm

    yep, then maybe your free loading kind will die off…that’d be a nice day.

    rightisright5116 in reply to Gus. | July 22, 2014 at 3:23 pm

    It wasn’t a typo. The intent was to punish States for not setting up their own exchanges. Except once the State exchange was set up, it also triggered the employer mandate/tax/penalty. States chose to go with the Fed exchange, not offer subsidies, and not have the employer mandate/tax/penalty. This is a case of Taxation without Representation, not a case of poor stenography.

    Daiwa in reply to Gus. | July 22, 2014 at 3:52 pm

    Only in the same sense conservatives are rooting for women to be deprived of birth control.

    (In other words, hogwash)

    gasper in reply to Gus. | July 22, 2014 at 4:02 pm

    The last I heard people using the ER for their routine medical care has increased since Obamacare became law. So what has changed? These people get their care the same way they did before only now they have “real” insurance. No one has been denied care then or now. If the courts shoot down this law nothing will change -these folks will continue going to the ER. Your party has not only accepted this, they created the conditions that led to this practice. These are the people who live on your plantation – your loyal voters and vassals. It shows our educational system needs revamping, not our health care system.

    Zinovy Roark in reply to Gus. | July 22, 2014 at 5:01 pm

    From Charles C.W. Cook at NRO: “We conclude,” the court’s majority opinion held, “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 majority rejected, too, the idea that the word “State” was ambiguous. “Nothing in the law,” the majority opinion observes, “requires interpreting ‘established by the State’ to mean anything other than what it plainly says.” Presumably, then-senator Ben Nelson, who withheld his vote until he was promised that the exchanges would be run locally, would agree.

    There were no typo(s) or ambiguities in the law. Ask Senator Nelson.

    “Conservatives rooting for millions of people to lose their health insurance” is a shallow cerebration authored by a demagogue. Alinsky Rule No. 7: “A tactic that drags on too long becomes a drag.” Your intended derision is not only a drag, it’s shopworn and whimsical. Ad hominem in the realm of Law is not a sign of intellection.

    “Conservatives rooting for millions of people to lose their health insurance”

    Conservatives rooting for millions of people to lose their pay for their own damn health insurance, the way they pay for their car insurance, home & contents insurance, pet insurance, travel insurance, liability insurance, life insurance, funeral plan insurance, etc.

    “Not subsidizing everyone’s health insurance” is to “Denying everyone health insurance” as “Not subsidizing my dogs’ pet insurance” is to “denying my dogs’ medical care”.

    If you can’t get other people to pay your bills, you’ll just have to prioritize your outgoings and work to pay them yourselves.

    Radegunda in reply to Gus. | July 22, 2014 at 7:51 pm

    I lost my insurance because the Democrats didn’t want people to be able to buy insurance with their own earnings. They chose to outlaw sensible policies and force the prices to soar, so we’d have to go crawling to the government and beg for a “subsidy” in order to get a policy that’s inferior to what we had before.

    The losers are people who were already responsibly providing insurance for themselves; and people with serious conditions who have found that their Obamacare policies don’t pay for the treatments or doctors or clinics that their old policies covered.

    The winners include people like:
    * a couple of Ivy League graduates who have chosen to spend all their time doing “art” instead of earning a living.
    * a woman who just didn’t want to work full-time so she dropped her full-time job with insurance as soon as she could get insurance paid for by other people.
    * a law student who was already getting cheap insurance but now he gets it entirely at other people’s expense so he’ll have more money for beer and entertainment.
    * illegal aliens.

    BrightlyWrought in reply to Gus. | July 23, 2014 at 6:25 am

    Wait, I thought the whole idea was affordable and effective health care, not just to have insurance?

    What good is this insurance if it makes us pay for stuff we don’t need and costs most Americans more?

    The fight initiated by the Democrats was supposedly over affordable and Universal coverage. Now that it’s been shown that the ‘affordable’ ideals were a political mirage your side has backtracked to the fact that it has increased the number of people and issues covered in a redistributive method on stark political lines.

    The left wing has made healthcare more expensive for a lot of Americans and you guys are spiking the football because people are complying with a Mandate to have insurance that costs them more.

    Congratulations on your victory in placing more costs on us who aren’t part of your current group of the “politically blessed”

mumzieistired | July 22, 2014 at 3:12 pm

Deference to the IRS – which has no legislative power – rather than to the Congress which wrote the law and which holds all legislative power??? Really????

rightisright5116 | July 22, 2014 at 3:20 pm

There are two key aspects to this.
1. No subsidies for those individuals that got their Obamacare through the Fed Exchange because their state did not set one up
2. The way the law was written, the employer mandate (or the tax for not offering company insurance) essentially does not exist if there are no subsidies available. (I guess Nancy Pelosi was right- they had to pass the law to see what was in the law.)

The Plaintiff’s argument was that the States made a choice to go with the Federal exchange, no individual subsidies, and no employer mandate (tax).
By illegally changing the law thereby making the subsidies available to individuals in states that by choice did not set up there own exchange, the employer mandate kicked in. Since the mandate was declared a tax by Justice Roberts, we have an old fashioned case of “taxation without representation” since the State made their choice for their constituents/employers who are still getting hit with the tax/mandate.

This pretty much guts the law since the insurance rates have gotten jacked up and are completely unaffordable to most of the people without a subsidy.

That was a sweet panel of 4th Circuit judges for the President. Perhaps this case was the reason Sen Reid felt such urgency to change the fillibuster rule and get the 3 Judges nominated by President Obama confirmed so they could participate in an en banc hearing in the DC Circuit.

As a lawyer, having read the opinion, I call bullshit on the 4th Circuit.

Where Congress uses the phrase “exchange established by a State”, in distinction to the phrase “exchange established under this Act” used elsewhere in the statute, there is absolutely no ambiguity.

“Exchange established by a State” does not include an “exchange established by the Federal government.” Except in an Orwellian world.

This is a wholly illegitimate, and purely political, decision.

    Daiwa in reply to Wisewerds. | July 22, 2014 at 3:57 pm

    Pretty sad when even the courts abandon the rule of law and effectively say, “The law is whatever the IRS wants it to be.” Where is there recourse to this sort of “law”? Certainly not in the 4th CCA.

TrooperJohnSmith | July 22, 2014 at 5:43 pm

De-fund the IRS to one-dollar a year. Then, let’s see how well they accept that deference. Hell, let’s see how many of them will work for free!

I’m reminded in all this of the foolishness (and weakness) of Stupak & Nelson in thinking they’d actually get what they demanded in exchange for their votes (numbers 59 & 60, of course).

In undercover tests of the new federal health insurance marketplace, government investigators have been able to procure health plans and federal subsidies for fake applicants with fictitious documents, according to findings that will be disclosed to lawmakers on Wednesday.

The results of the inquiry by the Government Accountability Office are evidence of still-imperfect work by specialists intended to assist new insurance customers and government contractors hired to verify that coverage and subsidies are legitimate. The GAO also pointed to flaws that linger in the marketplace’s Web site,

Good Professor. Did you ever take/teach/where cognizant of a law course on what happens when we the people say, “fsck the law” and your role in society is essentially moot?

Stated differently, what is the role of the honest lawyer (you) in lawless times?

Law is good, but it is not primary–it rests on something deeper.

This must be very disconcerting to you as our republic slips into war.

God Bless.