Appeals Courts Issue Conflicting Rulings on Health-Law Subsidies

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from The Wall Street Journal,

Subsidies Seen as Crucial to Implementation of Affordable Care Act.

Two U.S. appeals courts issued conflicting rulings on whether consumers can receive subsidies for health coverage purchased on insurance exchanges established by the federal government, clouding implementation of a major component of the Obama administration’s signature health care law.

In a substantial blow to the administration, the U.S. Court of Appeals for the District of Columbia Circuit, on a 2-1 vote, invalidated an Internal Revenue Service regulation that implemented a key piece of the 2010 Affordable Care Act. The regulation said subsidies for health insurance were available to qualifying middle- and low-income consumers whether they bought coverage on a state exchange or one run by the federal government.

Two hours later, a Richmond, Va.-based appeals court reached the opposite conclusion, unanimously upholding the IRS rule and handed the White House a victory that counteracted the administration’s loss in the other case.

If the two courts remain in conflict, it is a near certainty the Supreme Court will have to step in to resolve the dispute, setting the stage for another high-court ruling on a core piece of the health law.

The D.C. Circuit opinion, by Judge Thomas Griffith, a George W. Bush appointee, acknowledged that the decision has “major consequences,” but the court said the IRS rule wasn’t a permissible interpretation of the health law. Both judges in the majority were appointed by Republican presidents.

The Blue Cross and Blue Shield Association, which represents many of the insurers with the biggest marketplace presence, said the issue will “take time to be fully resolved by the courts.” In the meantime, the group said, its members “are committed to ensure individuals and families have access to high-quality affordable health coverage.”

The law requires most Americans to carry health insurance or pay a tax penalty, a mandate that was upheld by the Supreme Court two years ago. The subsidies were designed to work in tandem with the insurance mandate to make coverage more affordable for lower-income individuals.

More than 5 million Americans have selected a private plan through federal health exchanges and the majority received financial assistance, according to a June report by the Department of Health and Human Services. They pay an average of $82 a month in premiums, 76% less than the full premium.

The D.C. ruling also could hobble the functioning of a health-law provision that can require larger employers to pay penalties if they don’t offer affordable health coverage to full-time workers. The penalties are triggered when a worker receives federal subsidies for purchasing insurance on an exchange.

Insurers had warned a win for the challengers could destabilize insurance markets and lead to far higher premiums, even for those who didn’t receive subsidies.

The administration has further legal options, including a possible appeal to the Supreme Court. But first it plans to ask the D.C. appeals court to rehear the case, with all active judges participating in the review, administration officials said.

The full appeals court isn’t seen as conservative as it once was, thanks to the arrival of several new judges appointed by President Barack Obama.

“We believe that this decision is incorrect, inconsistent with congressional intent, different from previous rulings, and at odds with the goal of the law,” Justice Department spokeswoman Emily Pierce said. “In the meantime, to be clear, people getting premium tax credits should know that nothing has changed, tax credits remain available.”

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