Circuit Courts Issue Conflicting Rulings on Crucial ACA Provision

Two U.S. circuit courts arrived at conflicting opinions about a crucial element of the Affordable Care Act (ACA)—namely, whether the law grants the Internal Revenue Service the ability to distribute premium subsidies to people insured through federally run health exchanges.

In the first ruling, the U.S. Court of Appeals for the District of Columbia Circuit said on July 22 that the ACA does not permit the IRS to distribute premium subsidies on exchanges established by the federal government. Hours later, the U.S. Court of Appeals for the 4th Circuit came to the opposite conclusion, ruling that the IRS in fact has the authority.

The contradictory rulings put the health reform law back into the headlines and raise the possibility of another Supreme Court showdown between the Obama administration and opponents of the health reform law. The government said it would appeal the first decision to the full D.C. Circuit Court, where it is expected to prevail.

The subsidies are critical to the ACA, with millions of people enrolled in the health exchanges whose premiums are made more affordable because of the subsidies.

In the D.C. circuit ruling in Halbig v. Burwell, the court agreed with plaintiffs that the language of the ACA allows the IRS to issue subsidies only on exchanges established by states.

“We reach this conclusion, frankly, with reluctance,” Judge Thomas Griffith wrote in the majority opinion for the three-judge panel. “At least until states that wish to can set up exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still. Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges.”

D.C. Circuit Judge Harry Edwards, the dissenting voice, wrote in his dissent that the “myopic” majority opinion “ignores the basic tenets of statutory construction.”

“Appellants’ argument cannot be squared with the clear legislative scheme established by the statute as a whole,” he wrote. “By imposing the Appellants’ myopic construction on the administering agencies without any regard for the overall statutory scheme, the majority opinion effectively ignores the basic tenets of statutory construction. . . . Because the proposed judgment of the majority defies the will of Congress and the permissible interpretations of the agencies to whom Congress has delegated the authority to interpret and enforce the terms of the ACA, I dissent.”

In the decision by the U.S. Court of Appeals for the 4th Circuit for the Eastern District of Virginia, judges ruled in King v. Burwell that Congress clearly intended to make subsidies as widely available as possible to make insurance more affordable. To the Virginia judges that meant the IRS had a right to interpret the strict wording of the ACA to mean that all states would be eligible for tax-credits. ■

The decision of the U.S. Court of Appeals for the District of Columbia Circuit can be accessed here. The decision of the U.S. Court of Appeals for the 4th Circuit can be accessed here.