URGENT: U.S. appeals court guts most Obamacare subsidies

URGENT: U.S. appeals court guts most Obamacare subsidies

Cartoon by Branco, ed. by Ponick, original by permission, courtesy LegalInsurrection.
Cartoon by Branco, ed. by Ponick, original by permission, courtesy LegalInsurrection.

WASHINGTON, July 22, 2014 – In a stunning rebuke to seat-of-the-pants legislating and activist lower courts, a U.S. Federal Appeals Court, in a three-judge panel ruling Tuesday, overturned a lower court’s interpretation of a key portion of the vastly complicated “Affordable Care Act” (ACA).

In a 2-1 ruling, the panel observed that “Section 36B [of the ACA] makes subsidies available in the Exchanges established by states,” and the states alone, Senior Circuit Judge Raymond Randolph wrote in his majority opinion.

“Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanged ‘established by the State,’ we reverse the district court and vacate the IRS’s regulation’ regarding the enforcement of that section, the ruling concluded.

Judge Randolph also noted the obvious, observing “our ruling will likely have significant consequences both for millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly.”

The immediate consequences of this ruling are hard to predict. Given the Obama Administration’s tendency to illegally and unilaterally alter provisions of the unwieldy socialized healthcare legislation, the White House will likely ignore the ruling entirely while looking to reverse the Appeals Court Panel. The likely path would be a hearing by the full U.S. Court of Appeals for the District of Columbia Circuit, followed by an appeal to the Supreme Court if the panel’s ruling stands.

The Federal exchange, aka HealthCare.gov, covers individuals in the 36 states that chose not to establish their own exchanges—an action largely due to the fact that, after initial Federal operational subsidies for individual state exchanges, government support for those functions will quickly devolve to those state exchanges along with the onerous costs involved.

The 36 states spotting this provision quickly concluded the ensuing state tax increases that eventually would be required on the state level would prove unpopular and likely unbearable to already overburdened and underemployed taxpayers. As a result, they chose to opt out.

If the panel’s ruling stands, it could eviscerate the basis of the ACA. That’s because what would amount to a considerable majority of current customers would likely have to dump their current ACA plans as they could not afford them without the subsidy—something the Administration is likely to argue.

If the White House fails in their opposition to the current ruling after exhausting all possible appeals, Congress would be required to re-draft the questionable language to keep the subsidies in place for plans purchased through HealthCare.gov. The chances of such a rewrite passing both houses currently would have to be rated near zero, now that the House is fully in Republican hands.

The current ruling by the Appeals Court also is likely to affect the next step in the Obamacare juggernaut, the requirement that all employers with 50+ employees offer “affordable insurance” to all employees or face Federal fines, which the Supreme Court has already redefined as “taxes.” But if the employers can’t offer “affordable,” i.e., subsidized insurance to their employees, that provision of the law will essentially become invalid.

The business insurance requirement was written into the law specifically to take effect this year, 2014. But in another unilateral violation of the ACA, the Administration delayed implementation of this provision until 2015 to avoid a potential electoral disaster for the Democrats this coming November.

The current ruling, while not yet having the effect of law, highlights the problem of writing a vast complex piece of legislation, covering at least a sixth of the national economy, in haste, solely for political purposes and without input from the opposition party.

Nancy Pelosi told us her party would have to pass ACA legislation to find out what was in it. Apparently she was correct. We find out more about it every day.


  * Cartoon by Branco, reprinted with permission, slightly altered by the author. See original cartoon via LegalInsurrection.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17