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Why the D.C. Circuit declared Obamacare subsidies illegal in 36 states

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Beltway Confidential,Opinion,Philip Klein,Obamacare,Supreme Court,Appeals Courts,Health Care,Healthcare.gov,Law,Health Care Exchanges

Liberals were quick to dismiss as judicial activism the federal appeals court ruling declaring subsidies on federal health insurance exchanges illegal, but few have actually taken the time to explain why the judges ruled the way they did.

Ultimately, the 2-1 decision in Halbig v. Burwell written by Thomas Griffith and joined by Raymond Randolph hinged on two basic conclusions. One, the plain meaning of the words in President Obama's health care law -- “an Exchange established by the State” -- is that subsidies are only available for individuals living in states that have established their own exchanges (which means fourteen states plus the District of Columbia). Two, there is no evidence from the legislative record that justifies deviating from the plain meaning of the law.

More specifically, the judges ruled that "a federal Exchange is not an 'Exchange established by the State,' and section 36B [of the health care law] does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges." To get there, the judges looked at how the section interacted with other sections of the law.

The decision went on to note, "The government urges us, in effect, to strike from section 36B the phrase 'established by the State,' on the ground that giving force to its plain meaning renders other provisions of the Act absurd. But we find that the government has failed to make the extraordinary showing required for such judicial rewriting of an act of Congress. Nothing about the imperative to read section 36B in harmony with the rest of the ACA requires interpreting 'established by the State' to mean anything other than what it plainly says."

Given the majority's determination as to the plain meaning of the law's text, the judges then had to consider whether there's anything in the legislative history that would outweigh their determination as to the plain meaning.

The judges concluded, "The fact is that the legislative record provides little indication one way or the other of congressional intent, but the statutory text does. Section 36B plainly makes subsidies available only on Exchanges established by states. And in the absence of any contrary indications, that text is conclusive evidence of Congress’s intent."

The opinion states, "To hold otherwise would be to say that enacted legislation, on its own, does not command our respect — an utterly untenable proposition."

The judges also were aware of the major ramifications of their decision, but ultimately conclude that they had no choice.

"We reach this conclusion, frankly, with reluctance," they wrote. "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. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges."

On Tuesday, the Fourth Circuit Court of Appeals, in a similar case, reached a different conclusion, upholding the subsidies to federal exchanges.

The question now is whether the panel's decision will be reversed by the full D.C. Circuit Court and whether the Supreme Court will ultimately decide the case.

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