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Wow – D.C. Court of Appeals strikes Obamacare federal insurance exchange subsidy regulation

Wow – D.C. Court of Appeals strikes Obamacare federal insurance exchange subsidy regulation

IRS regulation granting subsidies to those who sign up on federal Obamacare exchange stricken

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

Full opinion and Judgment at bottom of post

Decision just released in Halbig case. Here’s the punchline:

Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. § 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act. See 26 C.F.R. § 1.36B-2(a)(1) (hereinafter “IRS Rule”).

Appellants are a group of individuals and employers residing in states that did not establish Exchanges. For reasons we explain more fully below, the IRS’s interpretation of section 36B makes them subject to certain penalties under the ACA that they would rather not face. Believing that the IRS’s interpretation is inconsistent with section 36B, appellants challenge the regulation under the Administrative Procedure Act (APA), alleging that it is not “in accordance with law.” 5 U.S.C. § 706(2)(A).

….Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges “established by the State,” we
reverse the district court and vacate the IRS’s regulation.

What problems does this create? Massive. All the millions of people who signed up for Obamacare on the federal exchange — and the true numbers were disputed — expecting to get tax credits as subsidies now will not get those subsidies.

A year-long effort to get people to sign up for Obamacare on the federal exchange will be in peril.

Here’s how The Washington Times summarized the effect prior to the decision, Five million Americans in for premium spikes if Obamacare challenge is successful:

A Washington-based consultancy estimated Thursday that 5 million Americans would see their health premiums spike if the courts rule in favor of a lawsuit that seeks to cut off Obamacare subsidies to about two-thirds of the states.

Consumers who purchased health plans on an insurance exchange run by the federal government would see an average premium increase of 76 percent if the plaintiffs prevail over the Obama administration, according to Avalere Health….

The stakes are high, because cutting off financial assistance to more than 30 states would blow a hole in Obamacare’s popularity.

Avalere says that in the 36 states served by the federal exchange, 87 percent of Obamacare consumers received subsidies, with a high of 94 percent in Mississippi.
The subsidies reduced monthly premiums by an average of 76 percent across the states, by 95 percent in Mississippi and by 80 percent in Florida, Alaska, Missouri and Georgia.

The Obama administration says subsidies will keep flowing, although I’m not sure how that happens once the District Court enters judgment (which it might stay or seek a stay, pending further appeal to the U.S. Supreme Court):

More to follow.

Obamacare Federal Exchange Subsidy Ruling – D.C. Court of Appeals

Halbig Obamacare subsidy Judgment D.C. Circuit

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Comments

Wow indeed. Will the court stay its ruling or do we get immediate chaos? I’m rooting for chaos, personally, because it is the only way we might get rid of some or all of this monstrosity.

    Sounds like the White House will not comply whether or not the court stays its ruling, and whether or not an appeals court stays the ruling for it.

    Musson in reply to DarkHelmet. | July 22, 2014 at 11:48 am

    “You mean ObamaCare is not the law of the land?”

    stevewhitemd in reply to DarkHelmet. | July 22, 2014 at 12:48 pm

    Given the 4th Circuit decision (how curious it came out today as well) I think any stay of the IRS is hold. Supreme Court may agree to take up the issue in its next term, which means we’ll get a decision (if they take it up) by next June.

    Maybe.

    Moudsie in reply to DarkHelmet. | July 24, 2014 at 7:59 am

    OMG–you Repukelicans are all nuts–it’s not a disaster–it’s saved thousands of lives — you have got to stop believing the lies Rush and Faux News brainwash you all with. That being said–if this is deemed illegal–and it’s the law–then the idiot governors of the state who refused to set up the system should be tossed in jail and replaced.

      ConradCA in reply to Moudsie. | July 24, 2014 at 9:40 pm

      If ObamaCare is the law then why has Tyrant Obama the Liar changed it over 30 times? Shouldn’t he be enforcing the law as written instead of changing it illegally?

      Instead of complaining about what “Rush and Faux News” say why don’t you explain what it is that that we are mistaken about? Furthermore, if ObamaCare has “saved thousands of lives” then please provide a list of those people who would have died without health insurance and why? You do realize that everyone without insurance could easily receive treatment by going to an emergency room?

      Also, the Supreme Court found that ObamaCare was unconstitutionally attempting to force states to create state run exchanges by cutting off funds. Basically the Federal government doesn’t have the power to force states to set up these exchanges. As most citizens never supported ObamaCare and after a few years ObamaCare is going to impose a huge financial burden on the states it is perfectly reasonable for states to refuse to comply with ObamaCare.

      You appear to be one of the progressive fascists who support Tyrant Obama the Liar. Tell me how you can support his illegal and unconstitutional actions? Do you claim that he doesn’t have to enforce the laws at written? That he has the discretion to change the laws? If you do please provide the basis for this belief and what are the limits? If he can change ObamaCare then why can’t he change election laws so that he can remain our permanent ruler?

      It’s pretty sickening how you evil people are so dishonest that you resort to insults and implicitly justify tyranny by our ruler.

      ConradCA in reply to Moudsie. | July 24, 2014 at 9:42 pm

      ObamaCare is a disaster in that it increases the cost of health insurance by at least 100% for the vast majority of Americans. Not only that but it gives the Federal government control over an important part of our lives.

MaggotAtBroadAndWall | July 22, 2014 at 10:42 am

So I guess this means that John Roberts will get a second chance to prove how well he can legislate. Our 535 elected legislators can’t seem to get it right.

    corday_d_armont in reply to MaggotAtBroadAndWall. | July 22, 2014 at 11:36 am

    What ever they blackmailed him with before will still get him to come up with another tortured head scratcher ruling in favor of Øbamacare.

    Roberts did something no SC has ever done. He put a limit on the Commerce Clause. In 20 years that may be more important than ruling ObamaCare was a tax.

      Troll Feeder in reply to Musson. | July 22, 2014 at 12:26 pm

      He could have done that without making up the tax excuse.

      Nov_Cubed in reply to Musson. | July 22, 2014 at 7:45 pm

      Agreed. I’m still pissed that folks dumped on Roberts instead of the government arguing it was a tax after they swore it wasn’t. The (d)ims were only to happy to help criticize Roberts.

inspectorudy | July 22, 2014 at 10:52 am

Now we see why obama has been trying to load the Circuit court with liberal judges. They always knew that obamacare would be challenged and probably lose at the lower level. What is so galling is that Bush appointed Roberts and we can just imagine how he will react to this when it reaches the SCOTUS. One can imagine that Roberts will make the point that the word “State” means government whether state or federal so that the subsidies are lawful.

Certain, I am, that there are white males on this court; which makes this court and it’s ruling illegitimate.

Robert doubleplusgood. Its vital that we hold our nose and support Establishment Republicans so that we can get another rock solid conservative nom like Roberts again…

THAT could be the ol’ ball game, rat thar…

There is nothing says the Supremes have to review this ruling.

    Midwest Rhino in reply to Ragspierre. | July 22, 2014 at 11:15 am

    I don’t know the language or details, but I just heard there is another parallel case in another court that (the commentator thought) would likely go the other way, so the two would be joined (?) and go to SCOTUS.

      Ragspierre in reply to Midwest Rhino. | July 22, 2014 at 11:22 am

      Dunno, but I will hold this hopeful thought…

      this decision ALSO means a lot of smug, self-aggrandizing Ivy League law professors were just plain wrong about their predictions and analysis.

      So, HEH!

Can’t write 20,000 pages and expect all to work out well. The writing of the bill was out sourced. The politicians couldn’t be bothered to read the bill and had to pass it while they could. Are we surprised that the running of the exchanges would work? Not at all. If only they had listened when the public said no to passing the ACA. But then they claim to be our betters.

    stevewhitemd in reply to showtime8. | July 22, 2014 at 12:50 pm

    The bill was passed four plus years ago. A question for our Congress-critters:

    “Have you YET read the bill?”

    I’m betting that for all 535, the answer is “no”.

      jrterrier5 in reply to stevewhitemd. | July 22, 2014 at 3:45 pm

      Reading the law would be easy. It’s the tons of regulations implementing the law that surely have not been read by anyone.

Midwest Rhino | July 22, 2014 at 11:25 am

So the court again rejects Obama’s writing of law, from his throne.

Harry Reid has basically turned control of the Senate over to Obama, by using his pocket veto on anything that Obama doesn’t want, or that would embarrass Democrat senators.

But now they will have to deal with Republicans, unless Justice Roberts pulls another leftist rabbit out of his … hat.

Death by a thousand cuts.

(Time for another fundraiser!)

To the idiot hag Pelosi [“we have to pass the bill to find out what’s in it”], it’s always preferable to READ a bill before you pass it. Utter and despicable moron.

As I understand it, the entire DC court [not the 3-judge panel] can vote on it if 0bama asks, and this decision is expected to be reversed. Then what?

BTW if it goes back to SCOTUS, I expect Roberts will be on the right side and interpret the state exchange requirement literally.

What was Obama saying about “settled law”?

Well at least we’re finally finding out what was in it.

Yes. 🙂

Decisions like this will have a serious impact on global warming and need to be ignored in order to keep the seas from rising and the planet from dying.

Freddie Sykes | July 22, 2014 at 11:44 am

Good but I have another Obamacare question.

Once the employer mandate is enforced, an employer can opt out of providing health coverage and pay a tax instead. An employer who supplies health coverage that does not meet the full mandates of the regulation is hit with fines – Ted Cruz calls them Faith Fines – that appear to be in excess of the taxes they would pay if the offered no coverage.

Shouldn’t the fines for insufficient coverage be less than or equal to the tax for no coverage?

    Freddie, I think you missed the part where the IRS ruled that if you drop coverage and pay the tax you will also be subject to additional FINES that add up to tens of thousands of dollars.

      Freddie Sykes in reply to Musson. | July 22, 2014 at 2:48 pm

      I am aware of this provision to fine employers; it does not seem to apply to Faith Fines. The PPACA seems to prefer no employer contributions outside of full coverage.

      http://dailycaller.com/2014/05/27/obamacare-to-fine-companies-that-give-workers-money-to-buy-their-own-health-insurance-plans/

      The Internal Revenue Service (IRS) plans to fine companies $36,500 per employee per year if the companies give their workers money to help them buy health insurance plans rather than directly providing health insurance coverage for the workers.

      “Under IRS Notice 2013-54, such arrangements are described as employer payment plans,” according to a Q+A posted to the IRS website. “An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation.”

      Note the terminology: “after-tax amount.” The IRS doesn’t like after-tax amounts being applied to things…

What I don’t get… the LA Times is writing about this (as one example) like it was some obscure provision no one knew about, a “word glitch” that survived multiple versions of the bill because no one was paying attention and the bill was just so huge.

Wasn’t the issue of denying subsidies for states governed by individuals too cruel, venal and with no regard for self-interest (i.e. re-election) to build exchanges for their citizens a much discussed, much blogged about issue on the left, part of the ongoing, on-the-hoof negotiations between Democratic radicals and Democratic centrists, particularly in the Senate? And didn’t no less than the President of the United States say he didn’t think governors/ states would be so cold to their citizens that they would refuse to build exchanges, accepting federal funds to do so?

And wasn’t the context of that, before the administration unilaterally changed the law of the land, that subsidies were only guaranteed for states that built exchanges, until all of a sudden, the weren’t?

    walls in reply to JBourque. | July 22, 2014 at 11:54 am

    Look for 0bama and 0bama bootlickers Reid and Schumer to start a PR campaign to vilify and shame the states that don’t have their own healthcare exchanges. It might work in some states.

    Murphy in reply to JBourque. | July 22, 2014 at 12:03 pm

    It was like the botched attempt to strong-arm states into expanding Medicaid by threatening (unconstitutionally)to withdraw funding from them if they didn’t. The Dems wanted to arm-twist states into setting up STATE exchanges, and then once that scheme failed and most states refused to set up STATE exchanges, Obama’s lapdogs in the IRS administratively extended tax subsidies to those enrolling in the FEDERAL exchanges as a way of salvaging the overall scheme. Because they could hardly get away with calling it the “AFFORDABLE Care Act” if they couldn’t hand out free subsidies to 87% of people who signed up on the federal (not state) exchanges.

    TL;DR? It started off as a “feature”, not a “bug”. Now Obama’s water carriers want to convince us it was a “bug” all along.

    stevewhitemd in reply to JBourque. | July 22, 2014 at 12:54 pm

    The LATimes has to say something. Usually whatever Journolist hatches.

    This was no obscure provision: the exchanges are fundamental to the law. Without the exchanges the ACA collapses. The whole point of this section was to induce the states to create exchanges by providing a significant penalty if they didn’t. The writers of the law, so immersed in DC they were, they didn’t IMAGINE that a significant number of states would say “no thanks” and not create exchanges.

    The law as written was purposeful and designed to induce a result, predicated on how the writers thought the system “should” work.

    So the LATimes, NYT, WaPo, TNR, Huffasnuffaguffalus, etc have to say SOMETHING, having been caught out.

Trooper York | July 22, 2014 at 11:58 am

This is all well and good but what difference does it make? Obama will not obey the Court. Who will call him to account?

And now the Virginia court has gone the other way. How quickly do the Supremes take this up?

It’s illuminating that the administration is going to keep doling out subsidies no matter what the courts determine. We are no longer a nation of laws.

    Doug Wright Old Grouchy in reply to DarkHelmet. | July 22, 2014 at 4:26 pm

    The final outcome of this case, with the two differing District Court decisions, will determine whether we have have remained a nation ruled by law or that we have become a nation ruled by Man.

    If the latter, that now our nation’s president is our ruler, then where are the boundaries? What difference would any law make since then, our future rulers can change it or modify it as they wish?

    Our president would become like the Queen of Hearts, words mean what the president says they mean.

    Somehow, I feel that before that point is reached, our country will have to undergo another upheaval, such as we’ve never truly experienced before. Either we stay true to the concept of being a nation of laws or there is no law and thus no consequence to any actions except that determined by force of arms.

    The question then could be what price are we willing to pay for peace? For freedom?

    What price is Obama will to have us pay to achieve his goal of radically transforming our country? I doubt I would like his answer.

    The Supremes won’t get involved because the full DC panel will reverse, thereby eliminating any circuit split. Other circuits will follow. Sorry.

Also very interesting that both decisions came today. Hmmm.

This just in: The Washington Times can’t do math.

First they write: “The subsidies reduced monthly premiums by an average of 76 percent across the states.” That sounds about right.

But they also say: “Consumers who purchased health plans on an insurance exchange run by the federal government would see an average premium increase of 76 percent if the plaintiffs prevail over the Obama administration […]”

Um, no. If your premiums were reduced 76%, then losing that reduction doesn’t make your premium increase 76%, it makes it increase THREE HUNDRED AND SEVENTEEN PERCENT.

Example: Your premiums would have been $100, but the subsidy reduces it 76% to $24. Going back to the full $100 would more than quadruple what you’re paying, not be a “premium increase of 76 percent” as the WashTimes incorrectly says. It would be a (100-24)/24*100 = 316.6666 percent jump in your premium.

1. This will be portrayed as the fault of the evil, cruel Republicans.

2. My daughter has an Obamacare policy in Florida. I will be paying for my principles. It will build character.

Can someone tell me on what basis the Federal government thinks they have the power to regulate health insurance?

There is no interstate market for health insurance because each state is a separate market for health insurance and subject to regulations of your state.

ObamaCare lacks a severability clause so why wasn’t the whole law thrown out when the Supreme Court found part of it unconstitutional?

From http://www.heritage.org/research/reports/2012/07/obamacare-fallout-from-the-supreme-court-and-medicaid-expansion

If the Administration’s attempt to centralize health care decision making in Washington was unworkable, its unconstitutional imposition on the states has made its problems even worse. Long before the Supreme Court’s decision to strike down the Medicaid mandate on the states as unconstitutionally coercive, opponents of the health care law argued that it would be financially unsustainable and administratively unworkable. The Court’s decision likely puts the law on a faster pace to collapse.
Under the law’s unconstitutional Medicaid expansion, states would have been required to expand their Medicaid program to cover all individuals up to 138 percent of the federal poverty level (FPL) or risk losing all of their federal Medicaid funds.

Fortunantly, only 8 million have signed up, and as there are about 350 million in this country that is a tad under 3%
And of that 3% only about 65% are under Federal exchanges.
So, the 96% of us who would rather burn than play the game just don’t care.
We will bring this down, one way or another.

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