Obamacare Dealt Crucial Blow by Federal Appellate Court

BRADENTON – In a ruling that could ultimately prove lethal to the Affordable Care Act (President Obama’s health care law), a federal appeals court for the D.C. circuit ruled that the federal government could not subsidize premiums for citizens in 34 states (including Florida) that use the federal insurance exchange. Hours later, another federal appeals court in a neighboring district issued a contradictory ruling in a similar case. The issue may find itself before the Supreme Court in the near future.

Just hours after the first ruling was issued, a panel of U.S. Court of Appeals judges for the 4th Circuit, which is based in Richmond, VA, issued a contradictory ruling in a separate case, raising the possibility of another high-stakes battle coming before the Supreme Court.

The law directs the states to set up the exchanges; however, 34 states opted not to. The federal government then set up an exchange for consumers in those states to shop health plans. The D.C. panel ruled that the federal government may not pay subsidies for insurance plans in those states.

The 2-to-1 ruling, issued Tuesday by a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit, could potentially cut off financial financial subsidies for more than four and a half million people who were deemed eligible for subsidized insurance in the federal exchange.

The court said that under the Affordable Care Act, subsidies are available only to people who obtained insurance through exchanges established by states and the law “does not authorize the Internal Revenue Service to provide tax credits for insurance purchased on federal exchanges,” and that the law “plainly makes subsidies available only on exchanges established by states.”

"We reach this conclusion, frankly, with reluctance," wrote District of Columbia Appeals Court judge Thomas Griffith. "At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly."

The subsidies are at the cornerstone of the 2010 law. The federal government pays up to 100 percent of premiums for people with low incomes.

Dissenting judge Harry Edwards wrote, "This case is about Appellants’ not-so-veiled attempt to gut the Patient Protection and Affordable Care Act."

The 4th Circuit court ruled 3-0 that the government was empowered to issue the subsidies in both types of exchanges.