Obamacare challenge could go to the Supreme Court

Alex Wong, Getty Images

WASHINGTON -- Two weeks after an appeals court in Virginia struck down a challenge to Obamacare's federal subsidy program, the four individuals who brought the case forward are now appealing to the Supreme Court.

The lawsuit, funded by a conservative group called the Competitive Enterprise Institute (CEI), hinges on problematic wording in the Affordable Care Act, which says that subsidies for low-income Americans can be given out via "an exchange established by the State." That provision contains no information as to how, or whether, tax credits can be administered under an exchange established by the federal government, despite the fact that the administration has allowed subsidies under federal exchanges through IRS regulation.

If the Supreme Court decides to hear the case and rules in favor of the plaintiffs, around $36 billion in subsidies would be jeopardized. The Urban Institute has predicted that in two years, an estimated 7.3 million low-income Americans would receive federal subsidies. Currently, 5.7 million people have signed up for health care coverage in 36 states that are under the federal exchange.

To qualify for subsidies, a person has to have an income 400 percent below the national poverty line.

"From the time these cases were first filed, we've tried to get this issue resolved as quickly as possible for the plaintiffs and the millions of individuals like them," said CEI general counsel Sam Kazman in a statement. "A fast resolution is also vitally important to the states that chose not to set up exchanges, to the employers in those states who face either major compliance costs or huge penalties, and to employees who face possible layoffs or reductions in their work hours as a result of this illegal IRS rule."

Kazman said petitioning the Supreme Court was the "next step."

On the same day the Virginia appeals court voted unanimously against the Obamacare challenge, another court panel just 100 miles north in Washington, D.C. came to a completely different decision, ruling in favor of a similar challenge by a vote of 2 to 1.

After the D.C. ruling came out, White House spokesman Josh Earnest immediately stated that the decision did not have "any practical impact" on Americans' ability to receive tax credits. The White House is expected to contest the ruling, Halbig v. Burwell, by calling for an "en banc" panel of all the judges in the D.C. circuit.

"You don't need a fancy legal degree to understand that Congress intended for every eligible American to have access to health care credits," Earnest said, "regardless of whether it was state officials or federal officials running the marketplace."

Justice Department spokesperson Emily Pierce has called the D.C. circuit decision "incorrect, inconsistent with Congressional intent, different from previous rulings, and at odds with the goal of the law: to make health care affordable no matter where people live."

In order for the Supreme Court to hear the new federal subsidies case, four justices need to agree to take it. The Court's next term starts in October, and cases are decided by the end of May.

Last June, the Supreme Court upheld Obamacare by a vote of 5 to 4, ruling that the law's penalties for not signing up for insurance were constitutional as a part of Congress's ability to levy taxes.

  • abigail bessler

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