Judge Rules Against ACA Subsidies in Federal Exchanges
On Tuesday, a federal district court judge in Oklahoma ruled that subsidies to help U.S. residents purchase coverage through the Affordable Care Act's federal insurance exchanges are illegal, the New York Times reports (Pear, New York Times, 9/30).
Oklahoma became the first state to file a suit challenging the subsidies in 2012 (Ferris, The Hill, 9/30). The case, Oklahoma v. Burwell, is similar to other suits that have been filed against the Obama administration over the subsidies (New York Times, 9/30).
The cases target a May 2012 Internal Revenue Service rule that allows subsidies to be offered through the federal exchange. Plaintiffs in the cases have argued that the IRS rule should be invalidated because it contradicts what Congress originally wrote in the ACA (California Healthline, 9/4).
However, the administration argued in the case that Congress intended for subsidies to be available to all U.S. residents who purchase health plans through any of the exchanges established under the ACA. It said that invalidating subsidies for plans purchased through the federal exchanges would gut the law.
In the ruling, Judge Ronald White of the Federal District Court in Muskogee, Okla., wrote that the federal government used "an invalid implementation" of the law to create the subsidy rule, which he said is not explicitly authorized in the law's language (New York Times, 9/30). He added, "The court holds that the IRS rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law" (Demko, Modern Healthcare, 9/30).
Further, White disagreed with the administration about the effect of a ruling against the subsidies on the overall ACA. He wrote, "On the contrary, the court is upholding the act as written. Congress is free to amend the [ACA] to provide for tax credits in both state and federal exchanges, if that is the legislative will" (New York Times, 9/30).
However, White placed his ruling on hold pending an appeal, which means subsidies for plans purchased through the federal exchanges will still be available in Oklahoma (Modern Healthcare, 9/30). The administration can appeal the decision to the 10th U.S. Circuit Court of Appeals in Denver, Colo. (Armour, Wall Street Journal, 9/30).
Oklahoma Attorney General E. Scott Pruitt (R) said the ruling shows "the administration can't rewrite the [ACA] by executive fiat" (New York Times, 9/30). He called the ruling "a consequential victory for the rule of law."
The Obama administration did not immediately comment on the ruling (Juozapavicius, AP/Washington Times, 9/30). However, Department of Justice spokesperson Emily Pierce said the ruling "is inconsistent with the text of the statute, the clear intent of Congress, common sense and the Fourth Circuit panel's unanimous contrary ruling on the same issue." She added that the administration "will appeal the decision" (Wall Street Journal, 9/30).
Meanwhile, Washington & Lee University law professor Timothy Jost called the ruling a "remarkably poorly thought-out decision" that does not "engage the [federal] government's argument at all" (Modern Healthcare, 9/30).
Increased Chance of Supreme Court Review
According to the New York Times, the ruling increases the chance that the Supreme Court will review the subsidies, given that federal appeals courts in the District of Columbia and Richmond, Va., issued split decisions on the issue in July (New York Times, 9/30). Meanwhile, another case challenging the subsidies is pending in Indiana.
University of Pennsylvania Law School constitutional law expert Kermit Roosevelt said the ruling "strengthens the argument for Supreme Court review," but noted that the Court "might well want to wait and see if this ruling is reversed on appeal" (Modern Healthcare, 9/30).
Jost added that he expects the "Supreme Court to await a circuit split" on the issue, noting that a split officially does not exist because the ruling in the case Halbig v. Burwell has been suspended, pending a full-court review (Haberkorn, Politico, 9/30).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.