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
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