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Policy: Law

Challengers to Obamacare's federal exchange subsidies ask for Supreme Court hearing

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President Obama's health care law is one step closer to making it back to the Supreme Court, as challengers on Thursday asked justices to review whether it was illegal for residents of 36 states to receive federal subsidies to help them purchase insurance — a matter that has divided lower courts.

At issue this time are the subsidies that the federal government provides for individuals purchasing insurance through Obamacare. Though the text of the law says the subsidies were to go to individuals obtaining insurance through an “exchange established by the state,” a rule released by the Internal Revenue Service subsequently instructed that subsidies would also apply to exchanges set up on behalf of states by the federal government.

Earlier this month, two federal appeals courts issued contradictory rulings on the whether this rule was legal.

In the case Halbig v. Burwell, the majority on a panel of the U.S. Court of Appeals for the District of Colombia Circuit sided with the challengers, and the Obama administration is expected to ask the whole court to review the case.

But in the meantime, challengers in the similar case King v. Burwell, who received an adverse ruling before the Fourth Circuit Court of Appeals, have asked the Supreme Court to weigh in as soon as possible.

"This is a challenge to the most consequential regulation promulgated under the Patient Protection and Affordable Care Act (“ACA”)," read the petition. "Two Courts of Appeals have squarely divided over its facial validity. The resulting uncertainty over this major plank of ACA implementation means that millions of people have no idea if they may rely on the IRS’s promise to subsidize their health coverage, or if that money will be clawed back. Employers in 36 states have no idea if they will be penalized under the ACA’s employer mandate, or are effectively exempt from it. Insurers have no idea if their customers will pay for health coverage in which they enrolled, or if large numbers will default. And the Treasury has no idea if billions of dollars being spent each month were authorized by Congress, or if these expenditures are illegal. Only this Court can definitively resolve the matter; it is imperative that the Court do so as soon as possible."

The full petition can be read here.

The votes of four justices are required for the Court to agree to hear the case, and they can do so regardless of whatever the full D.C. Circuit decides to do with Halbig.

If the justices agree to hear the case in their next term, the subsidies issue could be decided by next June.

As I detailed in an earlier post, a ruling against the Obama administration would have a number of significant ramifications. It would mean millions of Americans receiving insurance in 36 states would be stripped of those subsidies, and on the flip side, that taxpayers could save hundreds of billions of dollars. It would mean the employer mandate wouldn't apply in those 36 states and the scope of the individual mandate would be narrowed. It would make life a lot more difficult for Republican governors politically and could lead to the re-opening of Obamacare for changes by Congress.

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Philip Klein

Commentary Editor
The Washington Examiner

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