Healthcare Law Suffers Two Contradictory Court Rulings in Same Day

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July 22, 2014; Washington Post

Tuesday was a confusing and frustrating day for those following the implementation of healthcare reform. A three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled that the Affordable Care Act (ACA), also known as Obamacare, does not allow the federal health insurance exchange, known as, to offer insurance premium subsidies to those seeking coverage. Meanwhile, the U.S. Fourth Circuit Court of Appeals in Richmond, Virginia ruled that it is legal for the federal government to offer the subsidies through its exchange.

The contradictory rulings make it even more likely that the US Supreme Court will choose to hear the two cases when they are appealed. The D.C. case, Halbig v. Burwell (formerly Halbig v. Sebelius), may be reviewed by the full D.C Circuit Court before it goes to the US Supreme Court; the Fourth Circuit case, King v. Burwell (formerly King v. Sebelius), was decided by the full appeals court and its likely next step is to the Supreme Court. (The name changes in both cases reflect the confirmation of the current HHS Secretary, Sylvia Burwell, who succeeded Kathleen Sebelius in that post earlier this year.)

NPQ has covered the difficulties states have experienced with their healthcare exchanges. Only 14 states and the District of Columbia have their own exchanges; 36 states currently rely on the federal exchange (soon to be 37, as Oregon is in the process of abandoning its failed state exchange).

When the ACA was drafted in 2009 and enacted into law in 2010, it was believed that all 50 states and D.C. would have exchanges, with the federal government having a “catch-all” exchange for those few who did not apply through their state exchange. With state exchanges in the minority of states, access to health insurance premium subsidies on the federal exchange is more critical than ever to the ACA’s success.

The key issue in the two cases is whether the U.S. Department of Health and Human Services can interpret the ACA to imply—and issue regulations to support—that people applying for health insurance can receive subsidies through both state and federal exchanges. The interpretation is necessary because the law’s section on subsidies was drafted to identify state exchanges specifically but made no mention of the federal exchange. Obamacare opponents use this omission to argue for the end of subsidies on the federal exchange. If these opponents succeed, the ACA would be dealt a serious blow. On the other hand, ACA supporters argue that other sections of the law assume the presence of subsidies in all exchanges and, further, that CBO scoring of the law’s costs included federal exchange subsidies and was not challenged by the law’s opponents.

Recent court opinions, including U.S. Supreme Court opinions, have complained about Congress—under both Republican and Democratic leadership—leaving legislation incomplete, relying on the drafting of regulations and the interpretations of judges to resolve the hard choices deemed too difficult for Congress to tackle. There are more court challenges to Obamacare working their way through the courts. We have a long way to go before the ACA is settled law, one way or the other.—Michael Wyland