Obamacare subsidies reprieved by federal appeals court

Obamacare may be less likely to face another harrowing U.S. Supreme Court test now that the U.S. Court of Appeals for the District of Columbia Circuit has thrown out a three-judge panel ruling blocking premium subsidies to Americans living in 36 states. Last week, the court decided to have all its 11 judges rehear the case. Oral arguments are scheduled for Dec. 17.

Many legal observers say it's likely the full court, with a majority of judges appointed by Democratic presidents, will agree with the 4th U.S. Circuit Court of Appeals' July decision that the Internal Revenue Service rule allowing subsidies in the 36 states served by the federal insurance exchange is valid.

On July 22, a D.C. Circuit Court panel ruled 2-1 in Halbig v. Burwell

that the Patient Protection and Affordable Care Act clearly does not allow federal premium tax credits for residents of states that do not establish their own exchanges and overturned the IRS rule. Later that day, a 4th Circuit panel ruled unanimously in King v. Burwell that the law is ambiguous and that under the U.S. Supreme Court's Chevron doctrine for interpreting statutes, the IRS rule is a plausible interpretation of the law.

The full D.C. Circuit Court decision to vacate the panel decision and rehear the case—a rare move for that court—means there is no split for now between different federal appellate courts, making it less likely the Supreme Court will take up the issue.

Blocking subsidies in states served by the federal exchange likely would cause millions of Americans to lose coverage and would be a severe blow to the healthcare reform law. Supporters of the law would prefer not to have its fate rest in the hands of the Supreme Court's conservative majority. Four of those justices previously showed their dim view of the law in their dissent in the landmark 2012 case that narrowly upheld the law's constitutionality but made Medicaid expansion optional for the states.

Opponents of the Affordable Care Act had praised the D.C. panel's July ruling, saying the two Republican-appointed judges upheld the plain text of the law. Many other legal observers, however, argued the court ignored a number of provisions in the law that suggested Congress meant to make subsidies available in all states. They noted that the coverage expansion and insurance reform goals of the law depend heavily on subsidies being available in every state, and that no lawmakers or observers thought when the law was passed that subsidies would not be available through the federal exchange.

Laurence Tribe, a liberal-leaning constitutional law scholar at Harvard Law School, said the full D.C. Circuit Court “is quite likely to reverse the panel decision by taking a purposive and functional approach to the ACA rather than a narrowly literal approach.” The rehearing en banc “would not have been granted otherwise.” And 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 added.

Jacob Huebert, senior attorney with the Chicago-based Liberty Justice Center, which supports the position of the plaintiffs challenging the subsidies, acknowledged that having the full D.C. Circuit reconsider the case doesn't bode well for his side. But he noted there are pending federal lawsuits in Indiana and Oklahoma that haven't yet been decided at the trial level. They could produce decisions creating a circuit split. That would make it likely that the Supreme Court would take up the issue.

The plaintiffs in the King case had asked the Supreme Court to take their case directly, without waiting for the full D.C. Circuit to act in the Halbig case. But Tim Jost, a Washington and Lee University law professor who is an expert on the ACA, said it's unlikely the high court would take up the King case before the D.C. Circuit hears the Halbig case and issues its ruling. “It would be extremely unusual for the Supreme Court to take (up the issue) if you have two appellate courts that have both upheld a federal rule,” he said. “It would also be seen as purely a political decision.”

However, it requires the votes of only four justices for the Supreme Court to take a case. That means the four conservatives who previously found the ACA unconstitutional could drive the decision to consider the issue. And that would put Chief Justice John Roberts in the position of determining the law's fate again.

“The interesting question is really what Justice Roberts would want to do, since he's the one who saved Obamacare last time,” said Kermit Roosevelt, a constitutional law expert at the University of Pennsylvania Law School.

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