The argument didn't sit well with Judge Andre Davis (an Obama appointee) during a court hearing Wednesday before the 4th U.S. Circuit Court of Appeals in Virginia: “You want to kick millions of people in four states off the insurance rolls so your clients don't have to pay a few dollars extra?” Davis asked, referencing the four states in the 4th Circuit, including Virginia, that have federally run exchanges.
Michael Carvin, attorney for the four Virginians who filed the 4th Circuit case King v. Sebelius, told the three-judge circuit panel that his clients would suffer “classic pocketbook injury” if subsidies for exchange plans are allowed to flow to people who buy insurance on federally run exchanges—the injury being that the subsidies compel them to buy insurance.
The argument against subsidies in federal exchanges is based on the fact that the text of the Patient Protection and Affordable Care Act offers federal insurance subsidies to buy insurance “through an exchange run by the state.” But 36 states including Virginia elected to allow the federal government to set up and run their exchanges.
The Internal Revenue Service, which is overseeing the subsidies because they flow through tax credits, interpreted that language as a Congressional typo that contradicted the wider purpose of the law to extend insurance coverage to the widest possible group of people. The IRS promulgated rules the allowing sliding-scale subsidies to go to anyone under 400% of the federal poverty level, not just people who use state-run exchanges.
So far, no court has agreed with the plaintiffs' theory of the case. But in March, two appellate judges with the influential Circuit Court for the District of Columbia in Washington “appeared to agree” with the plaintiffs' side during oral arguments, according to an American Hospital Association bulletin on the case.
That case, Halbig v. Sebelius, is the furthest-along and the most-watched of the four. The other cases, Pruitt v. Sebelius in Oklahoma, and Indiana v. IRS in Indiana, are still awaiting district court rulings.
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