Oklahoma judge rules against Obamacare subsidies

In a legal setback for the Obama administration, a federal judge in Oklahoma ruled Tuesday that people in states that rely on the federal insurance exchange are not eligible for Obamacare premium subsidies to help them pay for coverage.

U.S. District Judge Ronald White, a George W. Bush appointee, invalidated an Internal Revenue Service rule interpreting the Patient Protection and Affordable Care Act to allow the premium tax credits in states that have not established their own exchange. “The court holds that the IRS rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law,” White wrote.

In his ruling, White rejected the administration's argument that striking down the subsidies would cripple the entire healthcare reform law. “Congress is free to amend the ACA to provide for tax credits in both state and federal exchanges, if that is the legislative will,” he wrote.

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White put his ruling on hold pending an expected appeal by the administration, which means subsidies will continue to be available in Oklahoma.

The Oklahoma court is the first U.S. District Court to rule that the language of the Affordable Care Act does not allow subsidies in states that have not established their own marketplaces. Experts say the issue may go up to the U.S. Supreme Court, and the outcome will be critical to the fate of the healthcare reform law. Without the subsidies in the 36 states that use the federal exchange, millions of people likely would lose their coverage and the law's insurance reforms would unravel.

In July, in a split decision in Halbig v. Burwell, a three-judge panel from the U.S. Court of Appeals for the District of Columbia Circuit also struck down the subsidies. Two Republican-appointed judges ruled against the subsidies, while a Democratic-appointed judge dissented. But that decision was invalidated when the full D.C. Circuit Court agreed to reconsider the case. Oral arguments are scheduled for Dec. 17.

On the same day the D.C. panel ruled against the administration in Halbig, a 4th U.S. Circuit Court of Appeals panel ruled unanimously in favor of the administration on the same issue in King v. Burwell. That case has been appealed to the Supreme Court, but the justices have not indicated whether they will take it up.

Yet another ACA subsidy lawsuit is still pending in Indiana. In August, a federal judge declined to dismiss the case brought by Republican Gov. Mike Pence.

The Obama administration is likely to appeal Judge White's decision to the 10th U.S. Circuit Court of Appeals, which has a majority of Democratic-appointed active judges.

Timothy Jost, a law professor at Washington and Lee University and an Obamacare supporter, was critical of White's ruling. “This is a remarkably poorly thought-out decision,” Jost said. “He doesn't engage the government's argument at all.”

But opponents of the law reacted gleefully to the opinion. “With the second federal court ruling that the federal government is breaking the law to implement Obamacare, it's time for the president to admit that his healthcare law is a bad deal for Americans,” said Tim Phillips, president of Americans for Prosperity, a conservative political advocacy group, in a written statement.

If a split emerges among the circuit courts on the issue, that increases the likelihood that the Supreme Court ultimately will take up the issue. That may put Chief Justice John Roberts back into the position of deciding the fate of the healthcare reform law.

“This strengthens the argument for Supreme Court review,” said Kermit Roosevelt, a constitutional law expert at the University of Pennsylvania Law School, “although the (Supreme Court) might well want to wait and see if this ruling is reversed on appeal.”

Nationally, the vast majority of exchange plan enrollees received federal premium subsidies to help pay for their coverage. According to the CMS, 87% of individuals who obtained coverage through for 2014 qualified for subsidies based on having household income of 100% to 400% of the federal poverty level.

Follow Paul Demko on Twitter: @MHpdemko



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