A divided three-judge panel on the D.C. Circuit Court of Appeals ruled that the text of the Affordable Care Act restricts the provision of premium tax credits to state-run exchanges. The two Republican appointees on the panel ruled against Obamacare while the one Democratic appointee ruled for the law.
"We conclude that appellants have the better of the argument: a federal Exchange is not an ‘Exchange established by the State,’ and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges," Judge Thomas B. Griffith wrote for the court in Halbig v. Burwell.
His ruling was joined in a concurring opinion by George H. W. Bush-appointed Judge A. Raymond Randolph, who said it would be a “distortion” to let the federal exchange provide subsidies. “Only further legislation could accomplish the expansion the government seeks,” he wrote.
Carter-appointed Judge Harry T. Edwards voted to uphold the subsidies.
"This case is about Appellants’ not-so-veiled attempt to gut the Patient Protection and Affordable Care Act," Edwards wrote in his dissenting opinion.
The ruling is very troubling for the Obama administration because the subsidies are critical to the success of Obamacare. The law encourages states to build their own exchange, but if they don’t the federal government operates one on their behalf. The subsidies, or premium tax credits, exist to help Americans between 133 percent and 400 percent of the poverty line buy insurance. That imperils the practicality of the individual mandate to get covered and the market regulations to protect sick people.
"We reach this conclusion, frankly, with reluctance," Griffith wrote for the court. "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."
The Obama administration is expected to seek a re-vote by the full active bench — an en banc ruling — which could potentially reverse the result. An en banc vote would be cast by the three judges who heard the case as well as 10 other judges on the active bench. Such a vote may be friendlier to Obamacare as it would feature 8 Democratic appointees and 5 Republican appointees. Four of the judges on the court were appointed by President Barack Obama, three of them after Senate Democrats eliminated the 60-vote threshold for most nominations in November to overcome Republican obstruction.
"The Department of Justice can, and will, seek en banc review by the full D.C. Circuit. Generally, this involves new briefing before a final decision," an Obama administration official told TPM after the ruling.
This is a breaking story and will be updated. The ruling is available below.