Full D.C. appeals court expected to uphold ACA subsidies

(Story updated at 12:40 p.m. ET.)

The District of Columbia U.S. Circuit Court of Appeals in Washington on Thursday said the full 11-member court will rehear (PDF) the controversial case that ruled Americans could not receive subsidies to help pay for plans on federally run health insurance exchanges. Oral arguments will begin Dec. 17.

The court's decision to rehear the case en banc, which experts said is rare for the D.C. appellate court, vacates the judgment issued earlier this summer. On July 22, a three-judge panel ruled 2-1 in Halbig v. Burwell that the Patient Protection and Affordable Care Act forbade people with lower incomes from receiving tax subsidies from insurance marketplaces run by the federal government, effectively making those subsidies illegal in 36 states.

Opponents of the Affordable Care Act greeted the D.C. court's initial ruling with praise, saying the judges upheld the text of the law. The law's supporters, however, argued the court read the text too narrowly and applied an unreasonable and inaccurate interpretation of exchange subsidies.

The July ruling dealt a fresh blow to President Barack Obama's healthcare law, which relies on the insurance subsidies to make coverage more affordable for millions of people. However, the Obama administration vowed at the time to petition for a full court review of the decision.

Many observers expect the full D.C. court will reverse the initial decision because there is a majority of Democratic-appointed judges on the court. Many legal experts also agree with the 4th U.S. Circuit Court Of Appeals panel ruling in July that the Internal Revenue Service rule allowing subsidies through the federal exchange is valid because the Affordable Care Act is ambiguous on the issue. Under the Supreme Court's Chevron doctrine, agencies can exercise discretion in interpreting ambiguous statutes.

Kermit Roosevelt, a constitutional law expert at the University of Pennsylvania Law School, said Obamacare decisions have typically been decided along partisan lines.

If the court does in fact reverse course, some believe that means a Supreme Court review would be unlikely since it would bring the court in sync with the 4th U.S. Circuit Court of Appeals. The Richmond, Va.-based 4th Circuit ruled in King v. Burwell that health insurance subsidies granted through the healthcare law were legal in both state and federal exchanges. The decision came mere hours after the D.C. Circuit concluded the opposite.

The plaintiffs who lost the King case have since appealed to the Supreme Court.

“It would be extremely unusual for the Supreme Court to take certiorari if you have two appellate courts that have both upheld a federal rule,” said Tim Jost, a Washington and Lee University law professor who follows the ACA. “It would also be seen as purely a political decision.” Jost added that it is also unlikely the Supreme Court would take up the case before the D.C. Circuit hears the case and issues its ruling.

Roosevelt likewise said the Supreme Court is likely to resolve a split between the circuits but may have no appetite for the case if there is no split. “Now they don't have to,” Roosevelt said. “They could just let it go.”

Laurence Tribe, a liberal constitutional law scholar at Harvard Law School, agrees that the likelihood of the Supreme Court taking the case “would go down substantially” if the full D.C. Circuit sides with the Obama administration. “This is unlikely to be the kind of issue that the Supreme Court would be eager to take up in the absence of a circuit conflict,” Tribe said in an e-mail.

Jacob Huebert, senior attorney with the Chicago-based Liberty Justice Center, which supports the legal argument that individuals in states without their own exchanges aren't entitled to subsidies, conceded that the development doesn't bode well for the law's opponents. But Huebert points out that there are still pending federal cases in Indiana and Oklahoma challenging the subsidies that could result in conflicting decisions. That would once again make it likely that the Supreme Court would ultimately have to decide the issue.

Additionally, it only takes support from four Supreme Court justices to agree to hear a case. That means the four Republican-appointed justices who voted in 2012 to strike down the law on grounds that the individual mandate was unconstitutional could opt to hear the case and once again put Chief Justice John Roberts in the position of determining its fate.

“The interesting question is really what Justice Roberts would want to do since he's the one who saved Obamacare last time,” Roosevelt said.

James Blumstein, a healthcare law professor at Vanderbilt Law School who also believes the Supreme Court will ultimately take up the case, said regardless of the outcome, he believes politics have muddied the legal process.

“The (D.C.) judges have become partisan tools, and I think this is unwarranted on their part and possibly undeserved,” said Blumstein, who testified before a House subcommittee in 2012 about the subsidy issue. He believes subsidies do not apply to the federally run marketplaces.

Much is at stake for consumers with the ruling. Without the subsidies, many would be forced to pay higher, potentially unaffordable monthly premiums. HHS said individuals with federal plans who qualified for the tax credits paid an average of $82 a month in health insurance premiums, down from the $346 monthly premium they would otherwise pay.

Follow Paul Demko on Twitter: @MHpdemko

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