In a potentially crippling blow to Obamacare, a federal appeals court panel declared this morning that government subsidies worth billions of dollars that helped 4.7 million people buy insurance on HealthCare.gov are illegal. The 2-1 ruling in Halbig v US Secretary of HHS said such subsidies can be granted only to people who bought insurance in an Obamacare exchange run by an individual state or the District of Columbia – not on the federally run exchange HealthCare.gov. The ruling relied on a close reading of the Affordable Care Act.
“Section 36B plainly makes subsidies available in the Exchanges established by states,” wrote Senior Circuit Judge Raymond Randolph in his majority opinion, where he was joined by Judge Thomas Griffith. “We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up their own Exchanges, our ruling will likely have significant consequences both for millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly.”
In his dissent, Judge Harry Edwards, who called the case a “not-so-veiled attempt to gut” Obamacare, wrote that the judgment of the majority “portends disastrous consequences.”
Indeed, the 72-page decision threatens to unleash a cascade of effects that could seriously compromise Obamacare’s goals of compelling people to get health insurance, and helping them afford it. However, the ruling does, and will not ultimately affect the taxpayer-fund subsidies the federal government issued to 2 million or so people through the 15 exchanges run by individual states, including California, and the District of Columbia, The Obama administration is certain to ask the full U.S. Court of Appeals for the District of Columbia Circuit to reverse the panel’s decision, which for now does not have the rule of law.
According to the story on CNBC, White House spokesman Josh Earnest said the ruling “for now – does not have any practical impact” on premium subsidies issued to HealthCare.gov enrollees now. ” “We are confident” that the ruling will be overturned, Earnest said. “We are confident in the legal position we have . . . the Department of Justice will litigate these claims through the federal court system.” Earnest said “it was obvious” that Congress intended subsidies, or tax credits, to be issued to Obamacare enrollees regardless of what kind of exchange they used to buy insurance.
Tuesday’s ruling endorsed a controversial interpretation of the Affordable Care Act that argues that the HealthCare.gov subsidies are illegal because ACA does not explicitly empower a federal exchange to offer subsidized coverage, as it does in the case of state-created exchanges. HealthCare.gov serves residents of the 36 states that did not create their own health insurance marketplace. About 4.7 million people, or 86 percent of all HealthCare.gov enrollees, qualified for a subsidy to offset the cost of their coverage this year because they had low or moderate incomes. If upheld, the ruling could lead many, if not most of those subsidized customers to abandon their health plans sold on HealthCare.gov because they no longer would find them affordable without the often-lucrative tax credits. And if that coverage then is not affordable for them as defined by the Obamacare law, those people will no longer be bound by the law’s mandate to have health insurance by this year or pay a fine next year.
The ruling also threatens, in the same 36 states, to gut the Obamacare rule starting next year that all employers with 50 or more full-time workers offer affordable insurance to them or face fines. That’s because the rule only kicks in if one of such an employers’ workers buy subsidized covered on HealthCare.gov. The decision by the three-judge panel is the most serious challenge to the underpinnings of the Affordable Care Act since a challenge to that law’s constitutionality was heard by the Supreme Court. The high court in 2012 upheld most of the ACA, including the mandate that most people must get insurance or pay a fine.