The D.C. District Court issued a decision this morning that, if not reversed, could kill Obamacare, leaving millions without health insurance. The three-judge panel voted 2-1 in favor of plaintiffs who argued that wording in the Affordable Care Act (ACA) only authorizes health insurance subsidies for policies purchased in state-based exchanges. As the law is written, individuals are eligible for subsidies when purchasing from a state-run health insurance exchange. The IRS ruled that subsidies are also available in federally facilitated exchanges. At the time the law was drafted, legislators assumed most states would set up their own exchanges.
This ruling affects residents of the 36 states that refused to build their own health insurance exchange, and, by default, let the federal government facilitate residents’ access to the Health Insurance Marketplace. The subsidies are available to individuals and families with household incomes less than 400 percent of the federal poverty level. According to the Department of Health and Human Services, more than six million were eligible for subsidies in federally facilitated exchanges during this past open enrollment period.
The subsidies make it possible for many Americans to afford health insurance. The Obama administration argues that the wording of the law, taken in context, makes it clear that subsidies would be available through all insurance exchanges. The plaintiffs argue that the subsidies were meant to be an incentive to reward states for setting up their own exchanges. States that did not set up their own exchanges did so out of protest. Without the subsidies, the health reform law would most likely fail, making the states’ protest effective.
“… even though the federal government may establish an Exchange ‘within the State,’ it does not in fact stand in the state’s shoes when doing so.” — Judge Thomas Griffith
In the court’s decision, Judge Thomas Griffith wrote that there is no ambiguity in the law. The statute, in regards to subsidies, clearly refers to an “exchange created by the state,” which is different from one created by the federal government. While the judge acknowledges the severe consequences of this decision, he states that the legislation must be the guide.
Dissenting Judge Harry Edwards wrote that the structure of the ACA gives regulatory agencies, in this case the IRS, some discretion in carrying out the law. Edwards believes the majority opinion ignores this structure. Given that the judgment defies the will of Congress, and would undermine the entire law, which was passed by Congress, Edwards chose not to vote with the majority.