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Obamacare Subsidies Case Granted Rehearing En Banc

By William Peacock, Esq. on September 05, 2014 | Last updated on March 21, 2019

Back in July, a curious thing happened: Two circuit courts of appeal, both addressing the same issue, released conflicting opinions within hours of each other. In the D.C. Circuit, the panel held that the language of the Affordable Care Act only authorized tax subsidies for low-income individuals who purchased insurance through state exchanges. A few hours later, and a few hours' drive south, the Fourth Circuit went the other way and agreed with the Internal Revenue Service's interpretation, which allows subsidies for those who purchase through the federal exchange.

The D.C. Circuit ruling was a massive blow to the federal program and could have meant the end of Obamacare. Could have, but might not, as the circuit just pulled its opinion and granted en banc review.

What's at Stake?

Obamacare. No, seriously.

The lengthy and complicated statute basically hinges the enforcement mechanism of the employer mandate on a sufficient number of individuals receiving subsidies when purchasing their own coverage. No subsidies, no enforcement of the mandate, no Obamacare, unless the legislature intervenes. Midterm elections are just two months away, and there's a decent chance that Congress will be more red than blue afterwards.

What's the Statute?

The statute states that tax credits are available to subsidize the purchase of insurance on an "Exchange established by the State under section 1311 of the [ACA]."

"State."

The question that divided the court, and led to the D.C. Circuit's "reluctant" ruling, was whether "State" means states and states alone, or whether "State" includes the federal exchange which was set up "on behalf of" states that refused to do so.

It's kind of like baseball: When the Feds pinch hit for the State, do they stay in the game as "the State" for the rest of the game, including the subsidies?

What's the Answer?

For two members of the D.C. Circuit panel, the answer was to stick to the text. The third panelist, Judge Harry Edwards, argued "It is inconceivable that Congress intended to give States the power to cause the ACA to 'crumble'" by refusing to set up their own exchanges.

What will the en banc court think? It is interesting to note that the two majority judges on the panel were Republican appointees, while the sole dissenter was a Democratic appointee.

And while party affiliation of the nominating president is a very imperfect measure of how judges' ideologies fall, the D.C. Circuit itself, not counting senior members, lines up seven Democratic to four Republican appointees -- a strongly left-leaning lineup.

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