Outlawing insurance premium subsidies in states without their own healthcare exchanges would lead to “disastrous consequences,” the Obama administration argued in a brief filed Monday in Halbig v. Burwell, a case that could have major ramifications for the nation's new healthcare law.
“It would deprive millions of Americans of insurance and create a gaping hole in the individual-coverage provision,” according to the brief filed with the U.S. Court of Appeals for the D.C. Circuit. “The loss of customers would have disastrous consequences for the insurance markets in the affected states, which would remain subject to the act's nondiscrimination requirements but without the safeguards that Congress found essential to preventing adverse selection. The result would be the very death spirals the act was crafted to avoid.”
At issue is whether the IRS' interpretation of the language of the Patient Protection and Affordable Care Act is correct. The IRS has been interpreting the language to mean that consumers may receive premium tax credits in states that are relying on HealthCare.gov because they didn't establish their own insurance exchanges.
One part of the law, however, says the tax credits are available only to Americans who enrolled “through an exchange established by the state.” The IRS argues that the law's clear intention was to offer subsidies to Americans in all states.
The court is scheduled to hear oral arguments in the case en banc, or before the full panel of judges, Dec. 17. A three-judge panel of the court already heard the case and, in a divided ruling, said subsidies should not be allowed in states without their own exchanges. But that decision was vacated in September when the D.C. Circuit Court decided to hear the case en banc.
The brief filed Monday goes on to say that Congress' intention was clearly to offer subsidies to residents of all of states, whether or not their states established exchanges. It argues, among other things, that the plaintiff's interpretation of Congress' intentions is contrary to the legislative record.
“To say that plaintiffs purport to have discovered an elephant hidden in a mousehole . . . understates the audacity of their enterprise,” according to the brief.
The brief filed Monday follows a number of recent developments over the subsidies issue. Also on Monday, 18 states—all with democratic attorneys general—filed a friend-of-the-court brief in the same case, supporting the administration's position.
The U.S. Supreme Court on Monday opted to put off a possible decision on whether to hear a separate but related case, King v. Burwell. King v. Burwell looks at the same issue as Halbig v. Burwell, except the lower court ruled in that case in favor of the administration.
The Supreme Court was scheduled to discuss King v. Burwell in private conference last Friday, but took no action following its conference. The Supreme Court is scheduled to again discuss the case in private conference this Friday, at which point the justices could decide to hear the case, decline to hear the case or again put off a decision on whether to take it.
Follow Lisa Schencker on Twitter: @lschencker
