Obamacare In Chaos As Federal Court Strikes Down Tax Credits For Low-Income Americans Who Buy Insurance In 36 States – But Different Court Backs Policy Within Hours

The future of Obamacare was uncertain today after a federal court in Washington, D.C. struck down tax subsidies for Americans who bought insurance through federally-funded exchanges. 

Within hours the same policy was held up by another court, setting up a Supreme Court showdown.

The cases revolve around four words in the Affordable Care Act, which says the tax credits are available to people who enroll through an exchange 'established by the state.'

The rulings affect consumers who purchased their coverage through the federal insurance marketplace – or exchange- that serves 36 states.

If the first ruling is upheld by the nation's high court, more than half of the 8 million Americans who purchased taxpayer-subsidized insurance under the law could see premium increases.

Americans who are covered through the federal exchange will see no immediate changes to their policies, however, as the courts sort out the issue.

'In the meantime, to be clear, people getting premium tax credits should know that nothing has changed. Tax credits remain available,' Department of Justice spokeswoman Emily Pierce said in a statement after the first ruling.

A three-judge panel in Washington, D.C. ruled 2-1 that the law, as written, only allows insurance subsidies in states that have set up their own exchanges. 

The majority opinion concluded that the law, as written, 'unambiguously' restricts subsides to consumers in exchanges established by a state. 

That would invalidate an Internal Revenue Service regulation that tried to sort out confusing wording in the law by concluding that Congress intended for consumers in all 50 states to have subsidized coverage.

The subsidies, in the form of tax credits, are available to people with annual incomes of up to 400 percent of the federal poverty level, or $94,200 for a family of four.

Causing further uncertainty is a decision by the 4th Circuit Court of Appeals in Richmond, Virginia, that was handed down this afternoon.

That court said in a unanimous ruling that tax subsidies are indeed available people who bought their insurance through the federal exchanges.

The seemingly arcane issue is crucial to the success of the health law because most states have been unable or unwilling to set up their own exchanges.

The small business owners who challenged the law through the Washington, D.C. court say a literal reading of its language invalidates the IRS subsidy to people in the federal exchanges. 

The opponents say that people who would otherwise qualify for the tax credits should be denied that benefit if they buy insurance on a federally facilitated exchange.

'It is implausible to believe that Congress gave the IRS discretion to authorize $150 billion per year in federal spending, particularly when Congress had directly spoken to this issue,' the D.C. Appeals court challengers said in a court filing.

'Major economic decisions like these – indeed, any decisions granting tax credits – must be made unambiguously by Congress itself.'

The Obama administration and congressional and state legislative supporters of the Affordable Care Act say the challengers are failing to consider the words of the statute in its entirety.

'It is pretty obvious what the congressional intent was here,' White House Press Secretary Josh Earnest said, which was for every qualified American to receive a subsidy 'regardless of whether it was state officials or federal officials running the marketplace.'

Pierce said the D.C. ruling is 'at odds with the goal of the law.'

'We believe that this decision is incorrect, inconsistent with Congressional intent,' the Justice Department official said.

An appeals court filing by congressional and state legislative supporters of the Affordable Care Act, similarly argues that 'Congress did not provide that the tax credits would only be available to citizens whose states set up their own exchanges.'

Congressional lawmakers and state legislators who are against the law hope that by limiting the subsidies to state exchanges, they can destabilize important aspects of the law, such as the individual mandate requiring most people to buy insurance.

'Today’s ruling highlights the ramifications of hastily passing legislation before fully knowing and understanding what it entails and how it will affect people,' House Republican Conference Chair Cathy McMorris Rogers said in a statement after the D.C. decision was handed down.

'For months, people all across this country have seen firsthand the flawed and ineffective implementation of Obamacare – in their skyrocketing premiums, lost coverage, limited access, and regulatory inefficiencies.

'And today’s decision is only further evidence of the legislation’s failure,' the GOP leader said.' It’s time to listen to the American people, enact real health care reforms, and start over. This law does not work.'

Andre Davis, a Senior Circuit Court Judge who wrote a concurring opinion on the Richmond court's decision, said he was not going to allow anti-Obamacare advocates to use the court to deny 'millions of Americans desperately-needed health insurance.' 

Davis admitted that the federal law was 'tortured' and it's construction was 'nonsensical' but it's 'manifest purpose, as revealed by the wholeness and coherence of its text and structure, could not be more clear.'

In an attempt to explain the law in lay terms, Davis offered up an equally tortured pizza-based analogy.

'If I ask for pizza from Pizza Hut for lunch but clarify that I would be fine with a pizza from Domino's, and I then specify that I want ham and pepperoni on my pizza from Pizza Hut, my friend who returns from Domino's with a ham and pepperoni pizza has still complied with a literal construction of my lunch order,' he said.

Judges on the D.C. case were Thomas Griffith, an appointee of President George W. Bush; A. Raymond Randolph, an appointee of Bush's father; and Harry Edwards, an appointee of President Jimmy Carter, who dissented.

A lower court had ruled that the law's text, structure, purpose, and legislative history make 'clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges.'

But the appeals court concluded the opposite – that the letter of the law 'unambiguously restricts' the law's subsidies to policies sold through exchanges established by the state.

'An Exchange established by the federal government cannot possibly be "an Exchange established by the State," ' Randolph wrote in a concurring opinion. 'To hold otherwise would be to engage in distortion, not interpretation. 

'Only further legislation could accomplish the expansion the government seeks.'

In a statement celebrating the D.C. court's decision, Sam Kazman, general counsel for the Competitive Enterprise Institute, one of the organization's responsible for funding the lawsuit said, 'The court’s decision puts an end to the power grab that the IRS rule represented.

'And more importantly it reaffirms the fact that we are a nation of laws enacted by Congress rather than rules issued by agenda-driven agencies,' Kazman added.

'Despite all the political calls for the country to 'get with the program and support Obamacare," it’s the Framers of the Constitution who have the last word.'