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In a Major Blow to Obamacare, Court Rules Health Insurance Subsidies Illegal in 36 States, Including Florida; 2nd Court Disagrees

| July 22, 2014

The federal Health Insurance Marketplace my be going away soon. (healthcare.gov)

The federal Health Insurance Marketplace my be going away soon. (healthcare.gov)

Last Updated: 3:42 p.m.

A federal appeals court this morning ruled that subsidies to pay for health insurance premiums under the Affordable Care Act were illegal in the 36 states, including Florida, that do not have their own exchanges, as the IRS had no authority to award them outside state-run marketplaces.

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The 2-1 decision does not go into effect immediately, as the court recognizes that the Obama administration would appeal: before noon, the administration requested an en banc hearing, meaning that it wants the case heard by the entire appeals court. But the decision, the second major setback to the health law in two months–after the U.S. Supreme Court’s Hobby Lobby ruling allowing certain companies to opt out of providing contraceptive coverage to women–is a potentially fatal blow to the Affordable Care Act. The overwhelming majority of the more than 7 million people now receiving coverage through the health law also receive subsidies to pay for the premiums. In Florida, for example, where the average monthly premium under the ACA is $68, some 91 percent of those enrolled get an average monthly subsidy of $278 a month. Most could not afford the premiums without the subsidies, which would disappear if the decision sticks.

The decision would also deal a serious blow to insurance companies, which have seen enrollment and revenue spike as the health insurance mandate went into effect this year. The mandate requires all Americans to have health insurance or pay a penalty equivalent to 1 percent of income, or a minimum of $95.

Hours after the court in Washington, D.C., issued its ruling, the United States Court of Appeals for the Fourth Circuit, in Richmond, reputed to be one of the nation’s most conservative circuits, issued its own ruling on a similar suit, but taking the opposite view, and unanimously so. “We find that the applicable statutory language is ambiguous and subject to multiple interpretations. Applying deference to the IRS’s determination, however, we uphold the rule as a permissible exercise of the agency’s discretion,” the Fourth Circuit ruled in an opinion written by Judge Roger Gregory, appointed by President Clinton in 2000. He was joined by Judge Stephanie Thacker Judge Andre Davis, both appointed by Obama. (See the full decision here.)

Judge Roger Gregory

Judge Roger Gregory

Gregory used a pizza analogy to make his point that the difference between state exchanges or the federal exchanges does not change congressional intent–to provide health insurance, with subsidies, to those who apply. “If I ask for pizza from Pizza Hut for lunch but clarify that I would be fine with a pizza from Domino’s,” the judge wrote, “and I then specify that I want ham and pepperoni on my pizza from Pizza Hut, my friend who returns from Domino’s with a ham and pepperoni pizza has still complied with a literal construction of my lunch order. That is this case: Congress specified that Exchanges should be established and run by the states, but the contingency provision permits federal officials to act in place of the state when it fails to establish an Exchange. The premium tax credit calculation subprovision later specifies certain conditions regarding state-run Exchanges, but that does not mean that a literal reading of that provision somehow precludes its applicability to substitute federally-run Exchanges or erases the contingency provision out of the statute.”

As other courts issue their rulings in months ahead, the likeliest outcome is that the matter will be finally decided by the United States Supreme Court, possibly in its next term, which begins in October.

Gov. Rick Scott, an ardent opponent of the health law, refused to set up a state-based exchange for the Affordable Care Act, and initially rejected $51 billion in federal subsidies to expand Medicaid, the health insurance program for the poor, over 10 years. When Scott changed his mind on the Medicaid subsidies, he’d lost the Legislature’s support on the matter. But he never changed his mind about a state exchange. Florida’s enrollees went through the federal healthcare.gov site.

The law “does not authorize the Internal Revenue Service to provide tax credits for insurance purchased on federal exchanges,” Judge Thomas Griffith wrote for the 2-1 majority of the United States Court of Appeals for the District of Columbia Circuit. The law, he wrote, “plainly makes subsidies available only on exchanges established by states.” (See the full decision, with the dissent, below.)

Judge Thomas Griffith

Judge Thomas Griffith

President George W. Bush appointed  Griffith to the court in 2005. His 73-24 confirmation vote included that of then-Sen. Barack Obama. The first President Bush appointed Arthur Randolph, who wrote a brief concurrence, in 1990. Harry Edwards, the lone dissenter in the decision, was appointed by President Carter in 1980.

In his concurrence, Randolph cited a 1926 precedent by Justice Louis Brandeis to support his interpretation of the law: “What the government asks is not a construction of a statute, but, in effect, an enlargement of it by the court, so that what was omitted, presumably by inadvertence, may be included within its scope.  To supply omissions transcends the judicial function.” Brandeis, ironically, was one of the court’s most liberal justices and a supporter of social experiments. But he was also suspicious of bigness and outsized power–especially that of corporations, but also that of government.

The case was initially brought  by Jacqueline Halbig, a resident of Virginia, which does not have an exchange, along with residents of West Virginia, Tennessee and Texas, and corporations based in Missouri, Texas, and Kansas. In two previous cases, lower courts in the District of Columbia and Virginia ruled in favor of the government. Today’s decision is one of four such cases still making their way through lower or appeal courts across the nation, each of them making similar arguments against the health law’s subsidies, and all of them an echo of the numerous challenges to the ACA that resulted in the U.S. Supreme Court’s 5-4 decision in 2012 upholding the health law. That decision, written by Chief Justice John Roberts, declared the law constitutional based on Congress’ right to tax, and the IRS’ right to administer those taxes–including, presumably, the subsidies coupled with the mandate.


“The fact is that the legislative record provides little indication one way or the other of congressional intent,” Griffith wrote, a statement with which most members of Congress who voted for the ACA in 2010 would likely disagree: Congress’ intent and assumption at the time was that the exchanges would be created as a matter of course, with the federal exchange as a backstop, and the primary intent of the law remaining making health coverage affordable–as its title implies–through subsidies.

Edwards, using very strong language in his dissent, ridiculed Griffith’s claim about congressional intent, or the complainants’ claim that Congress did not intent the federal Department of Health and Human Services to provide the backstop to state exchanges.

“This claim is nonsense, made up out of whole cloth,” Edwards wrote. “There is no credible evidence in the record that Congress intended to condition subsidies on whether a State, as opposed to HHS, established the Exchange. Nor is there credible evidence that any State even considered the possibility that its taxpayers would be denied subsidies if the State opted to allow HHS to establish an Exchange on its behalf. The majority opinion ignores the obvious ambiguity in the statute and claims to rest on plain meaning where there is none to be found. In so doing, the majority misapplies the applicable standard of review, refuses to give deference to the IRS’s and HHS’s permissible constructions of the ACA, and issues a judgment that portends disastrous consequences.”

Dissents have no power of law, but they do influence subsequent decisions. (Innumerable labor law and expansive free speech interpretations currently taken for granted were originally written in dissents by Brandeis.) In fact, it was an echo of Edwards’s dissent that formed the heart of the majority opinion of the Fourth Circuit Court of Appeals today.

“We reach this conclusion, frankly, with reluctance,” Griffith went on. “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.”

 

DC Appeals Court Decision on ACA Subsidies (2014)

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23 Responses for “In a Major Blow to Obamacare, Court Rules Health Insurance Subsidies Illegal in 36 States, Including Florida; 2nd Court Disagrees”

  1. Rob says:

    The teabaggers and their cohorts (who have employer provided healthcare) are probably dancing in the streets.

    • NortonSmitty says:

      No, I’m sure they are going to give us their standard boilerplate lecture on those damned Activist Judges! You know, the bastards who thwart the will of the people and re-write laws passed by Congress and deemed constitutional by the Supreme Court. I can’t wait to hear their screams!

      I’m sure it’s gonna’ happen any minute now, but in the meantime does anybody know how I can get this goddamned monkey to fly outta’ my butt?

  2. Jon Hardison says:

    Agreed Rob. We get the government we deserve. Apparently we’ve been very, very naughty. Funny thing is that it’s not like the insurance we’ve had to buy is really making any sense anyway. It’s almost impossible to find a doctor or a dentist and if you’re with Florida Blue… OMG! The company is useless!

    We’re marching backward toward people being corporate assets (some form of slavery). Maybe we should just let it happen. If the baggers and corps got what they actually wanted we’d at least have the benefit of being on the same side for once.

  3. A.S.F. says:

    Yes, their Christian values and compassion for the most vulnerable among us may reign supreme today…but the Obama administration will certainly not let this disgustingly partisan ruling stand.

  4. Tim says:

    To quote FlaglerLive…. “In Florida, for example, where the average monthly premium under the ACA is $68, some 91 percent of those enrolled get an average monthly subsidy of $278 a month.”

    Does anyone see a problem with this math?

    • Nancy N. says:

      I don’t believe there is math to be done with that sentence. I believe the sentence means that the average person is paying $68 out of pocket and then receiving $278 in subsidies to supplement the premium payment.

  5. Johnny Taxpayer says:

    There is nothing partisan about this ruling, the ruling simply says the law never empowered the IRS to provide these subsidies. This is what happens when you have an administration and an extremely partisan and one sided congress shove through a piece of legislation through procedural gimmicks without taking the time to actually read what is in the law. Nancy Pelosi, Speaker of the House at the time famously said “We have to pass the law to see what’s in it”.. well, now we’re seeing what’s in it, or more aptly, what’s not in it.

  6. Concerned Citizen says:

    So why not just keep it just to one govt entity called Medicaid now? That’s simple. But then they can’t win your votes running as a liberal socialist/commune-ist by promising you can dip into somone else’s pocket for your housing, your food, your healthcare, and your cell phone. It’s a self-serving political con job. Didn’t work well in Russia and collapsed their economy. What on earth makes these naive politicians think it will work here?

    At the core of every healthy and strong society is the a common understanding that every able bodied man and woman is *entitled* to work.

    Diligently work to make their way – not entitled to cash from their neighbor’s bank account if they choose a lifestyle that doesn’t include enough work to pay the bills. And then you have naive people like Obama come along and blame the hard working people for creating the problem. That’s plain stupid but it buys a ton of votes demonizing all the familes who came here with absolutley nothing years ago and now enjoy the fruits of their belief in diligence and hard work instead of the lazy entitlement society Obama, Reed, and Pelosi want for one purpose and one pupose alone – to maintain political power and control over the masses. It is a warped worldview that supposes money grows on trees for everyone to just pick whenever they like instead of sowing the seeds of diligence to earn and maintain it.

    Medicaid already serves a true compassionate purpose for those we all love who are unable to earn their way. If we want to keep it real simple, we could increase the income levels for those who are currently struggling or just starting out while we focus on creating a society with a core value of lots and lots of opporunties to serve other people in jobs or careers.

    • A.S.F. says:

      And what happens, “Concerned Citizen”, if you find yourself on the other side of that fence one day? Even people who “diligently work hard” can find themselves needing a helping hand from others. I hear some of these Tea Bagger/ Ronald Reagan Assembly types trying to couch their prejudices and biases in what seems to them to be politically correct code words that suggest that they hold dear this black and white vision of two Americas: (1) Those that work hard and, therefore, should feel assured of the limitless future that they deserve, with no worries of any misfortune that might befall them that might wipe those preconceived ideas out, and (2) a bunch of “welfare queens”, “illegals” and other assorted ne’r do wells who lounge around just waiting to take the money away from honest, hard-working worthy Americans. There are women among those numbers who have never spent ONE day in the workplace and who are collecting benefits on the strength of their spouse’s work history. Yet, they and their spouse may well be collected much more in Social Security and Medicare benefits than they ever put in. So, why should I have to pay for YOUR choices, stay-at-home mom? There are people among this number who are steadily “downsizing” their assets so that their estates will be shielded from the hit they may take if they ever need long-term care or nursing care. Why should anyone else have to pay the tab for YOU, Mr. and Mrs. careful saver? Shouldn’t you be paying the full freight for yourself or your spouse? After all–Isn’t self-sufficiency YOUR philosophy that you feel all should abide by? I think it’s only fair that YOU should be treated the same as you would treat others. If that ever happens, and people decide it’s OK not to take care of you, good luck to you…Be careful what you wish for.

      • Concerned Citizen says:

        I have been on the other side and the system did work to give me a hand up when I needed it.

        • A.S.F. says:

          Concerned Citizen says–That is a shame. Having been there, one would think you would have a little more compassion and concern for the people who ARE there. What a shame that your own experience has not made you the kind of person who is willing to treat others less fortunate better than the way YOU were once treated. Given the vagaries of life, I would not make the mistake of thinking that misfortune could never strike again–although I very much hope for your sake that it won’t.

    • Nancy N. says:

      “Didn’t work well in Russia and collapsed their economy.”

      Either you are seriously cherry-picking your examples or you are insanely ignorant about healthcare in the rest of the world. You do realize that practically every western European country has socialized medicine – and Canada as well – and our country’s healthcare outcomes and expenditures are worse than those countries? We spend more to get a shorter life expectancy and worse health outcomes. How is that “better?”

      And this isn’t just about “people who unable to earn their way”. It’s also about self-employed people (a rapidly growing segment of society) like my husband and I, who both have medical histories that make us uninsurable under the old system of medical underwriting. I have lupus and other serious medical conditions and went uninsured for TWO YEARS prior to the ACA law going into effect because I literally could not buy insurance at any price due to my medical history. Now, I finally have insurance and can take care of my medical condition before it kills me. The ACA law probably saved my life. No exaggeration.

      I am NOT lazy or “entitled”. I work 60-80 hours per week running a business that I built from scratch, while juggling my own medical condition and caring for a child with a disability and a serious medical condition. My family needs medical insurance and the ACA law is the only way we can get it.

      • Obama 2014 says:

        benghazi!

        Your story is made up. No way the ACA is helping you. I don’t know anyone that it is helped.

        benghazi!

        Obama is socialist muslim that eats puppies.

        benghazi!

        I am going to Hobby Lobby with my gun, my big gulp and a chicken sandwich and buy some non union made chinese made merchandise for my home.

        benghazi!

        All kidding aside, you would think a Joe the Plumber like person like yourself would be given an opportunity to flourish with affordable healthcare for your family to build jobs for your small business. Yet another example of the GOP lies.

      • Concerned Citizen says:

        I totally agree with your point on pre-existing conditions. Why they had not altered existing health insurance regulation or added medicaid benefits to allow for pre-existing conditions while expanding eligibility requirements within the existing Medicaid program for people struggling financially was just plain wrong!

        But everything was and is still already in place to just make a few adjustments.

        Instead, they decided to create and entirely new arm of the government to edify and memorialize themselves into eternity with massive unnecessary taxes that will strap our children and grandchildren down for years to come. Sorry kids, Mom and Dad, Grandma and Grandpa, were selfish or naive, so you have to pay for it all now. But it’s only $20++ trillion dollars so maybe your children won’t be financial slaves to the IRS and Federal Reserve in their lifetimes. That should make any reasonable person very concerned.

  7. m&m says:

    Hey, Obama 2014 how do like this?????

  8. karma says:

    The Senate end around for the “Nuclear Option” was for this purpose. The full court hearing will have a 7-4 Democrat majority. There is no need to panic, Harry and the gang have this all under control for now. The Supreme Court may be a little tougher. Will Roberts cave again?

  9. Franklin Tower says:

    I have no problem with Medicaid expansions. I have big, big problems with subsidizing the guy next door at my expense. I’m no “teabagger”, I am a like long Democrat and I have a Master’s Degree in Political Science. I have extensive experience with state level Medicaid programs and hospital reimbursements. The ACA is unworkable as currently enacted. It should be totally scrapped. It is completely inequitable and since is unfair it will not last. I find it offensive and and for lack of a better term, half a**ed.

    • Obama 2014 says:

      I have big, big problems with subsidizing the guy next door at my expense.

      Do you have a problem with the guy that lives in the big house at the beach subsidizing their personal plane and yacht on their taxes?

      • Frankin Tower says:

        I’m sorry but that analogy is an over simplification and a fallacy. We don’t know about the guy with the boat and the plane and his IRS status. I don’t have a plane. I have a little boat but it’s up on the trailer because I can’t afford to run it. It was my retirement promise to myself. The thing about Medicaid is that it’s need based, I have no problem with need based programs. I have a big problem with unfair programs like the ACA that take from one and give to another. It’s not equitable and people know it. It didn’t even work in Russia.

        • Obama 2014 says:

          Actually it’s not. The fact that you can claim a boat and a plane on your taxes but not a car and all it’s expenses is a direct shot at the middle class. No one cares what the guy in the big house does on his taxes but EVERYONE is concerned about poor people getting a break to get insurance. The Horrors..

          But lets be honest. Thanks to Regan and the GOP breaking up the Unions and Clinton allowing NAFTA it is impossible for people to get a fair paying job. We are in a new world where people like me aren’t afforded pensions and have to rely on 401k and Roths for our future. We have to take out crazy loans to just get a degree to make 45K a year but a house is 150K and a good car is 15K.

          The ACA is a fair program because it allows people to finally have insurance and they pay based on their income. It works just like a bank and a credit score.

          It would be working better if the Republican states opened up the exchanges to medicare. But the GOP is doing everything to kill it. Honestly if they didn’t think it would work do you think they would spend Millions to try and kill it. They would just let it die on it’s own.

          It took 75 years for this country to try and fix the healthcare system and because it’s not working at 100% everyone wants to kill it, what happened to this country? Has everyone become a quitter and selfish? Congress should be working on making the law stronger but they just keep voting to kill it.

  10. Ken Dodge says:

    To Nancy N. who writes: “I work 60-80 hours per week running a business that I built from scratch…”

    Obama says “You didn’t build that business, somebody else did.”

  11. A.S.F. says:

    The reason that an “expanded Medicare” option could not be enacted is because it could NEVER IN A MILLION YEARS get past stage pre-1 with Conservatives. Remember all those Tea Baggers marching with their “GET YOUR GOVERNMENT HANDS OFF MY MEDICARE! signs? The Conservative propaganda machine had folks (especially older folks) running scared that Healthcare Reform would mean the death of THEIR benefits. “Sharing” Medicare is not something that fearful folks like that, watching FOX news 24 hours a day, would EVER allow to happen. This is what I fault Obama for: I fault him for caving in to the special insurance, pharmaceutical medical industry interests as well as trying to work in good faith with Republicans who will never stop trying to defeat anything that isn’t in the previailing interests of the “haves”, no matter what the needs of the “have nots’ or “only have some” may be–especially if Obama’s name is attached to it.

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