Obamacare exchange subsidies: Legal or not?

Obamacare exchange subsidies: Legal or not?

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People await the June 29, 2012 Supreme Court Obamacare decision.

COLORADO SPRINGS, Colo., July 22, 2014 — In conflicting rulings today, two federal courts disagreed on whether the federal government could offer subsidies to people who sign up for Obamacare insurance policies through the federal exchange.

On Tuesday morning, the U.S. Court of Appeals for the Washington D.C. Circuit ruled in Halbig v. Burwell that the IRS rule allowing ObamaCare subsidies to be dispersed through federal exchanges in 36 states that do not have state exchanges is illegal. This means the second-highest court in the land has ruled that the administration, through a ruling by the IRS, is breaking the law.

The plain language of the law says that the law’s premium subsidies are available only to exchanges “established by the state.” The drafters of the law expected that the states, incented by federal money, would readily establish state-based exchanges. Most other federal welfare programs are managed through the states, so the Democrats believed they could bribe the states into creating their own health insurance exchanges, too.

READ ALSO: Is the Affordable Care Act doomed by appeals court ruling?

Colorado, for example, has received millions of federal dollars just to set up their state exchange. As that subsidy is running out, Colorado’s exchange administrators are looking for additional sources of revenue — including a proposal to tax every insurance policy issued in the state, whether it goes through the exchange or not.

Despite expectations, 36 states declined to create their own exchanges. The ruling means that 5.4 million people who signed up via the federal exchange are no longer legally allowed subsidies. More than a quarter million employers would also be freed from the unpopular, unfair Obamacare employer mandate.

As might be expected from an administration that routinely ignores the other branches of the federal government, the Obama administration said it will continue handing out subsidies despite the court’s ruling that the subsidies are illegal.

White House press secretary Josh Earnest said that while the case continues to be battled out in the courts, the administration will continue to dole out billions in tax credits to federally-run exchange customers.

“It’s important for people all across the country to understand that this ruling does not have any practical impact on their ability to continue to receive tax credits right now,” Earnest said in a press briefing.

In other words, “We’ll continue to do what we want.”

READ ALSO: Federal Judge dismisses Obamacare suit, raises constitutional questions

The administration is appealing the ruling, but according to law the ruling must be implemented unless the court grants a stay. No such stay was given today. The ruling was made by a three-judge panel, which is typical. The administration is requesting an en banc decision, which means that all 11 judges on the court will make a joint ruling.

Judges should apply the law impartially, without regard to parties or politics. In reporting results, the press routinely reports who it was that appointed the judges, strongly implying that rulings are political. This is not wholly without merit, as Republicans typically appoint judges who try to apply the law while Democrats appoint judges who apply policy and make law.

Such was the case today as two conservative judges declared the IRS rule unconstitutional — albeit reluctantly, they said.

That was also the case as the Fourth Circuit Court of Appeals ruled that the subsidies are legal in a separate case just hours later. This court said the language was “ambiguous” and deferred to the administration’s “discretion,” while also giving weight to their interpretation of Congress’s intent — and to their feeling that Obamacare subsidies are “desperately-needed.”

Conservatives think; liberals feel.

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

This court wrote, “What they [the appellants] may not do is rely on our help to deny to millions of Americans desperately-needed health insurance through a tortured, nonsensical construction of a federal statute whose manifest purpose, as revealed by the wholeness and coherence of its text and structure, could not be more clear.”

They also wrote in their preachy ruling that the appellants should pay their “tiny tax penalty” if they don’t want to purchase health insurance. That tiny penalty is $95 this year, but will grow to $695 per person or 2.5 percent of their income later.

The end result of today’s rulings is a tie that will be appealed to the Supreme Court. Although the Court can choose whether to accept the appeal, they are more likely to do so when there are conflicting lower court rulings.

Justice John Roberts may get that rarest of opportunities in life: a second chance to do the right thing and strike down Obamacare. If so, let’s hope he gets it right this time.

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