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Obamacare Subsidies Curbed by D.C. Circuit Ruling

By Brett Snider, Esq. on July 22, 2014 | Last updated on March 21, 2019

Obamacare subsidies may not be available to some customers after a federal appellate court redefined the federal government's role in doling out these tax credits.

A three-judge panel of the D.C. Circuit Court of Appeals ruled 2-1 Tuesday in Halbig v. Burwell that when the Affordable Care Act authorized the federal government to give subsidies, it only allowed those credits to go to customers who purchased insurance via a state-run insurance exchange. CBS News reports that 36 states rely on "federally-run Obamacare marketplaces," which may be denied subsidies under this new ruling.

What should consumers know about this Obamacare decision?

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White House Not Fazed

Although many are worried that this ruling could prevent the federal government from offering the Obamacare subsidies that make healthcare affordable for many Americans, the White House doesn't appear to be worried. Spokesman Josh Earnest stressed Tuesday that the ruling "does not have any practical impact on [consumers'] ability to receive tax credits right now," reports CBS News.

Many Americans are likely hoping that this remains the case, as it was hard enough to determine if they were eligible for subsidies in the first place.

What's the Issue?

The Obamacare subsidy case centers on the interpretation of the phrase "established by the State" in the legislation which underpins the federal healthcare system. Law professor Jonathan H. Adler explained for The Volokh Conspiracy in March that he believes the law was intentionally written to leave out federally created marketplaces from subsidies -- an incentive for the 50 states and D.C. to create their own.

Those who signed up for Obamacare in its 2014 launch may have used either state- or federally created insurance marketplaces, and the D.C. Circuit believes only the state-created ones can offer subsidies to consumers. This may be bad news for those in states like Idaho and New Mexico, which are still developing the IT platforms to run their own marketplaces, according to CBS News.

Appeal Likely

Perhaps the reason why the White House seems unshaken is that the ruling is likely to be appealed to the full panel of the D.C. Circuit, in a hearing en banc. In a case as politically charged as this one, many pundits are certain to remember what a struggle it was for lawmakers to even confirm judges to the D.C. Circuit.

And now that Obamacare's subsidies are potentially on the line, the makeup of the D.C. Circuit may be crucial.

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