(CN) - In the space of less than two hours, two federal courts of appeals issued conflicting rulings on whether the government can lawfully subsidize premiums for consumers in 36 states that use the federal insurance exchange.
First, by a 2-1 vote, the D.C. Circuit invalidated
an Internal Revenue Service regulation that made subsidies available to qualifying middle- and low-income consumers whether they bought health insurance coverage on a state exchange or on one run by the U.S. government.
"We reach this conclusion, frankly, with reluctance," Judge Thomas Griffith wrote for the majority. "At least until states that wish to can set up exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly.
"But, high as those stakes are, the principle of legislative supremacy that guides us is higher still," the ruling continues.
Joined by Judge A. Raymond Randolph, Griffith found that, "on its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia ..."
However, "the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the act."
"We conclude that appellants have the better of the argument: a federal Exchange is not an 'Exchange established by the State,' and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges," Griffith wrote.
In remanding the case with instructions to grant to the government's challengers, four individuals and three employers, summary judgment and to vacate the IRS rule, the ruling could impact some 4.5 million people who were previously deemed eligible for subsidized health insurance coverage.
This appeared to be very much on the mind of Judge Harry Edwards, who in his dissent said "the majority opinion ignores the obvious ambiguity in the statute and claims to rest on plain meaning where there is none to be found.
"In so doing, the majority misapplies the applicable standard of review, refuses to give deference to the IRS's and HHS's permissible constructions of the ACA, and issues a judgment that portends disastrous consequences," Edwards wrote.
A 4th Circuit ruling
on a different case, issued just over 90 minutes later, meanwhile says that agency discretion supports the IRS' creation of subsidies.
That decision by Judge Roger Gregory emphasizes that the tax credit-subsidies are essential to fulfilling the primary goals of the Affordable Care Act, and that Congress was aware of their importance when drafting the bill.
"The IRS rule advances this understanding by ensuring that this essential component exists on a sufficiently large scale," Gregory wrote. "The IRS rule became all the more important once a significant number of states indicated their intent to forgo establishing Exchanges."
"It is thus entirely sensible that the IRS would enact the regulations it did, making Chevron
deference appropriate," he added. "Confronted with the act's ambiguity, the IRS crafted a rule ensuring the credits' broad availability and furthering the goals of the law. In the face of this permissible construction, we must defer to the IRS rule."
Judge Andre Davis concurred. "Congress specified that exchanges should be established and run by the states, but the contingency provision permits federal officials to act in place of the state when it fails to establish an exchange," he wrote. "The premium tax credit calculation subprovision later specifies certain conditions regarding state-run Exchanges, but that does not mean that a literal reading of that provision somehow precludes its applicability to substitute federally-run Exchanges or erases the contingency provision out of the statute."
The Affordable Care Act, the Obama administration's signature domestic legislation, requires Americans, with some exceptions, to purchase health insurance or pay a tax penalty.
The subsidies were intended to encourage buy-in to the program by making the mandated coverage more affordable for low-income consumers.
According to the U.S. Department of Health and Human Services, as of June, more than 5 million have purchased health insurance through federal exchanges, with the majority receiving some degree of financial assistance.
The White House has already suggested it will ask for an en banc review of the D.C. Circuit decision, but challenges to the Affordable Care Act, which the U.S. Supreme Court upheld in 2012, continue.
Another Obamacare-linked challenge on its way to appellate review comes from Milwaukee, where on Monday a federal judge ruled
that Sen. Ron Johnson and his legislative aide, Brooke Ericson, could not challenge a regulation that requires lawmakers and their staffs to obtain health insurance through the exchanges.
In dismissing the Republicans' case, U.S. District Judge William Griesbach said the plaintiffs could not prove they were injured by the policy, and that "absent a concrete injury to the party bringing the lawsuit, there is no 'case' or 'controversy' over which the courts have jurisdiction."
"Under our constitutional design, in the absence of a concrete injury to a party that can be redressed by the courts, disputes between the executive and legislative branches over the exercise of their respective powers are to be resolved through the political process, not by decisions issued by federal judges," he wrote.