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Federal Court of Appeals deals possible devastating blow to Affordable Care Act

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The U.S. Court of Appeals for the District of Columbia issued a ruling on Tuesday morning in Halbig vs. Burwell, a case that questions the legal authority of the Internal Revenue Service to issue tax credits and penalties to individuals and businesses in states which chose not to set up state-run health exchanges, that legal scholars from both sides believe is a potentially devastating blow to the Affordable Care Act.

The question in the case is whether the IRS had the authority to determine that tax credits (subsidies) can be issued to those that join through the federal exchange despite actual wording in Section 1311 of the ACA that specifies that authority over state-run exchanges only.

The Obama administration contends that the tax provisions in the ACA, commonly known as Obamacare, apply to both state and federal run exchanges and that subsidies should be granted to those that join through the federal exchange when they have no state exchange option.

The 2-1 decision striking down the provision means that states that decided to let the federal government run an exchange for them are no longer subject to many of the penalties in Obamacare. It also means that millions of people in the 34 states that opted to depend on a federal exchange are now exempted.

The exemption of millions of individuals (and thousands of businesses) from the funding mechanism in Obamacare may be a critical blow to President Obama’s signature achievement.

Prominent George Washington University law professor Jonathan Turley said during an interview with Fox News on Monday morning that a decision against the IRS could result in “cardiac arrest” to the ACA.

The United States Supreme Court will ultimately decide this issue, so while in “cardiac arrest,” the Affordable Care Act is still breathing-for now.

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