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Judge: No Obamacare subsidies through federal insurance marketplace

The Affordable Care Act suffered a fresh legal setback on Wednesday, when a federal judge in Oklahoma ruled that the federal government could not provide insurance subsidies to customers in states that declined to set up their own marketplaces under the federal health care law.

The decision increases the possibility that the Supreme Court will eventually decide to weigh in on the matter. Several previous federal court decisions have come down on opposite sides of the dispute. In July, an appeals court in Richmond, Virginia, upheld the subsidies provided through federally-administered marketplaces, but an appeals court in D.C. struck them down on the same day.

Courts issue conflicting rulings on Obamacare subsidies 02:13

For a variety of reasons, from political opposition among Republicans to difficulties building the insurance exchanges in some states, only 14 states elected to establish their own exchange to allow consumers to comparison-shop health care plans. The other 36 states punted the job to the federal government, which offered to step in if a state was unable or unwilling to erect its own marketplace.

If the decision reached Wednesday by the judge in Oklahoma is upheld by the Supreme Court, the decision could strip health insurance tax credits from more than 4 million people in the 36 states that allowed the federal government to administer their insurance exchanges.

Proponents of Obamacare have warned that such a move would effectively gut the health care law, making insurance coverage unaffordable for many consumers who rely on the tax credits to cover their premiums.

The Oklahoma judge, Ronald A. White, said the provision of insurance subsidies through the federal marketplace rested on an "invalid implementation" of the law, noting that the law only approves subsidies for insurance purchased through "an exchange established by the state."

The administration contended it was "standing in the shoes" of those 36 states in establishing their exchanges and doling out subsidies, according to the New York Times, but White brushed aside that argument, saying it doesn't "comport with normal English usage."

Still, he disputed suggestions that his ruling, if upheld, would annihilate the totality of the health care law, saying Congress is free to update the law to permit subsidies in states with federally-run insurance exchanges.

"The court is upholding the act as written," he wrote in his decision. "Congress is free to amend the Affordable Care Act to provide for tax credits in both state and federal exchanges, if that is the legislative will."

Oklahoma's Repulican attorney general, E. Scott Pruitt, hailed White's decision as a "victory for the rule of law."

"The administration and its bureaucrats in the IRS handed out billions in illegal tax credits and subsidies and vastly expanded the reach of the health care law because they didn't like the way Congress wrote the Affordable Care Act," Pruitt said in a statement. "That's not how our system of government works."

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