A federal circuit court in Washington, D.C., ruled Tuesday morning that the federal government may not subsidize health insurance plans for people in the 36 states that decided not to set up their own marketplaces under the Affordable Care Act.
However, just hours after the D.C. court issued its ruling, the 4th Circuit Court of Appeals issued a contradictory decision, saying subsidies issued through federal exchanges are in fact legal.
Both decisions hinge on the wording of the law, which says that subsidies are available to individuals who purchase health insurance through exchanges "established by the state."
By a 2-to-1 majority, the D.C. court ruled that subsidies do not apply, then, to exchanges set up by the federal government. The Halbig v. Burwell decision reads: "The meaning of section 36B appears plain: a federal Exchange is not an 'Exchange established by the State.'”
The Obama administration is expected to appeal the D.C. court ruling, given that if it stands more than 4.5 million Americans would lose the subsidies they receive to help pay for health insurance premiums purchased through Healthcare.gov.
But the effects could be even more devastating. In his Halbig v. Burwell dissent, Judge Harry Edwards wrote:
This case is about Appellants’ not-so-veiled attempt to gut the Patient Protection and Affordable Care Act (“ACA”)...As Appellants’ amici candidly acknowledge, if subsidies are unavailable to taxpayers in States with HHS-created Exchanges, “the structure of the ACA will crumble.” It is inconceivable that Congress intended to give States the power to cause the ACA to “crumble.”
Others agreed the consequences could be far-reaching. "A federal appeals court just dealt Obamacare its biggest legal defeat in more than four years," wrote Jason Millman at the Washington Post, referring to the ruling that struck down the subsidies.
"For many people, their share of premiums could increase sharply, making insurance unaffordable," Robert Pear notes in the New York Times.
Even the majority of the D.C. Court judges acknowledged the import of their decision:
We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still.
The White House voiced disappointment with the Halbig ruling.
“You don’t need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health care costs, regardless of whether it was state officials or federal officials who were running the marketplace,” said Obama administration press secretary Josh Earnest. “I think that is a pretty clear intent of the congressional law."
The rulings make it likely that Obamacare will end up back in the nation's highest court. "The conflicting rulings sets up a circuit split that could fast track the cases to the Supreme Court," Elise Viebeck writes in The Hill.
The subsidy tax credits will remain in effect while both cases moves through the courts.