TUESDAY, July 22, 2014 (HealthDay News) -- In a wild day for Obamacare, two federal appeals courts arrived at completely different conclusions Tuesday on the use of financial subsidies provided to millions of Americans who bought health insurance through the federal HealthCare.gov exchange.
The conflicting opinions suggest that the matter is headed for a showdown before the U.S. Supreme Court.
In a 2-1 ruling Tuesday morning, the U.S. Appeals Court for the District of Columbia Circuit said that the subsidies -- in the form of tax credits -- may only be provided to people who buy health plans in states that run their own health insurance exchanges. The exchanges are intended to let consumers shop for insurance plans that best meet their medical needs and financial abilities.
"We reach this conclusion, frankly, with reluctance," Circuit Judge Thomas Griffith wrote for the majority.
"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," he concluded.
In a dissenting opinion, Harry Edwards, a member of the three-judge District of Columbia panel, said, "This case is about appellants' not-so-veiled attempt to gut the Patient Protection and Affordable Care Act."
The lawsuit was filed by a group of individuals and employers in states that did not establish health exchanges. They maintain that the Internal Revenue Service erred in extending subsidies to people who bought health plans through the federally run exchange.
But in a separate ruling later Tuesday, the 4th U.S. Circuit Court of Appeals in Richmond, Va., upheld the IRS's interpretation of the law.
Judge Roger Gregory wrote that "tax credits are essential to fulfilling the [Affordable Care] Act's primary goals and that Congress was aware of their importance when drafting the bill." He also noted that "the economic framework supporting the Act would crumble if the credits were unavailable on federal exchanges."
The subsidies are a crucial piece of the Affordable Care Act, also known as Obamacare. Without them, millions of Americans would be unable to purchase health insurance under the controversial health-reform law. The law requires virtually all Americans to have health insurance or pay a penalty in the form of a tax.
Thirty-six states chose not to create their own Internet-based exchanges for consumers to sign up for insurance coverage under the Affordable Care Act. Many are headed by Republican governors who oppose the law.
Of the more than 8 million people who signed up for an Obamacare health plan, more than 5 million selected a plan through the federal HealthCare.gov exchange, according to a June report from the U.S. Department of Health and Human Services.
Eighty-seven percent of federal marketplace buyers selected plans with tax credits. Their premiums are 76 percent less than the full premium, on average, the report indicated.
The Affordable Care Act, often dubbed Obamacare, was championed by President Barack Obama and passed by Congress in 2010. The law is particularly unpopular with Republicans, who view it as an unconstitutional intrusion by the federal government into individual rights.
Opponents of the law maintain that Congress never intended to allow people who purchased plans in states that relied on the federally operated exchange to receive tax-credit subsidies.
Andrew Kloster, a legal fellow at The Heritage Foundation, a conservative think tank in Washington, D.C., said the statute clearly directs subsidies "only to states that elected to set up insurance exchanges." He said the District of Columbia appeals court's decision "reaffirms that the administration cannot rewrite the health law that was passed, and it stops the Internal Revenue Service from doing the same."
Families USA, a consumer advocacy group that supports the Affordable Care Act, said Tuesday's decision by the D.C. jurists is not the final word.
"It will inevitably be placed on hold pending further proceedings," said Ron Pollack, the group's executive director.
"We expect that today's 2-1 split decision in the D.C. Circuit Court of Appeals represents the high-water mark for Affordable Care Act opponents -- and the water is already receding very rapidly, as today's subsequent ruling by the Fourth Circuit makes evident," he added.
If the battle over the subsidy provision reaches the U.S. Supreme Court, it won't be the first time the nation's highest court has weighed merits of the Affordable Care Act. In 2012, the court ruled 5-4 that the law itself was constitutional. Last month, the court ruled -- again, 5-4 -- that family-owned companies don't have to comply with a provision of the Affordable Care Act that requires them to offer insurance coverage for contraception if that requirement violates their religious beliefs.
Visit the official federal government website for details on coverage under the Affordable Care Act.
SOURCES: U.S. Court of Appeals, District of Columbia Circuit; United States Court of Appeals for the Fourth Circuit, Richmond, Va.; Families USA, Washington, D.C.; The Heritage Foundation, Washington, D.C.; June 18, 2014, research brief, Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services
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