Consumers in most states are not eligible to receive tax credits that slash the cost of health insurance under the Affordable Care Act because of the way the law is written, a federal appeals court panel has ruled, delivering a major blow to Obamacare. Meanwhile, a second federal appeals court has upheld the subsidies.
The court clash suggests President Barack Obama's signature health care law may ultimately be headed back before the U.S. Supreme Court.
The federal website HealthCare.gov serves as the online insurance marketplace in more than 30 states that chose not to establish their own exchange where residents can shop for health coverage and qualify for financial assistance. However, language in the health law says the subsidies should apply only to plans bought through "an exchange established by the state."
© MIKE SEGAR/Reuters/Corbis
This phrase was at the center of an Obamacare challenge, Halbig v. Burwell, brought before a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit. Plaintiffs argued that the statute does not allow HealthCare.gov to provide subsidies because it is not a state-based exchange.
In a 2-1 decision, the judges agreed.
No immediate impact
The court's majority acknowledged that "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."
Still, consumers who enrolled in Obamacare through the federal exchange should hold tight for now, says Linda Blumberg, a senior fellow at the Urban Institute's Health Policy Center in Washington.
"There's a lot of space to go before this could have implications," she says. The Obama administration could ask for an "en banc" decision, in which the full D.C. circuit court would need to weigh in, she adds.
In separate decision that came down less than two hours after the D.C. ruling, a U.S. appeals court in Richmond, Virginia, said that while the law's language was murky, the intent was clear.
"The statute as a whole clearly evinced Congress's intent to make the tax credits available nationwide," the Virginia court opinion reads.
White House is 'confident'
If the D.C. decision stands, the fallout could indeed be massive. More than 5.4 million people signed up for a health plan through HealthCare.gov during the inaugural open enrollment period, and 87 percent of them chose a subsidized plan, according to the federal Department of Health and Human Services. The average tax credit was $264, leaving enrollees with an average monthly premium of $82.
The Obama administration feels "confident" the final outcome of the case will be in its favor, White House Press Secretary Josh Earnest told reporters during a briefing Tuesday.
"Congress intended for every eligible American to have access to these tax credits that lower their health care costs, whether or not the marketplace was run by federal officials or state officials," he said.
Americans signing up for Obamacare will already be enrolled in 2015 plans by the time the case is decided, says Deborah Chollet, a health insurance research leader at Mathematica Policy Research in Washington.
"In the short term, life for people seeking good insurance coverage is the same as it was yesterday, but the battle rages on," she says.
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