A federal judge in Virginia has tossed a lawsuit, which mirrors one under appeal in Washington, that claims Obamacare subsidies should only flow to residents who live in a state that decided to run its own insurance market under the law.
The decision on Tuesday is another setback for Republican lawmakers and limited-government advocates who say the Obama administration rewrote the Affordable Care Act through rule-making by the IRS.
Businesses and individuals have sued in various jurisdictions, arguing that when the health care law says subsidies can be paid to the exchanges, or health markets, that were "established by the state," that excludes the 34 states that refused to set up their exchanges and left it to the federal government.
The Obama administration and top Democrats in Congress said that was never their intent, and now two federal court judges have agreed.
"While on the surface, Plaintiffs' plain meaning interpretation of [that section of the law] has a certain common sense appeal, the lack of any support in the legislative history of the ACA indicates that it is not a viable theory," U.S. District Court Judge James R. Spencer wrote in his decision out of the Eastern District of Virginia.
David King, 63, and three other Virginia residents brought the suit because the Obamacare subsidy in their state makes them subject to the law's individual mandate, which requires almost all Americans to hold health insurance.
Without the subsidy, they would qualify for a financial-hardship exemption from the mandate because the cheapest plan available on the federal Obamacare exchange exceeds 8 percent of their projected 2014 household income.
Judge Spencer, who was appointed by President Ronald Reagan, wrote "it seems comprehensible that the omission of any mention of federally-facilitated Exchanges under [the relevant] could imply that Congress intended to preclude individuals in federally-facilitated Exchanges from receiving tax subsidies."
If the lawsuit or ones like it prove successful, millions of Americans in nearly two dozen states could no longer collect taxpayer subsidies to help them buy insurance — a key element to making the new law work.
"However, when statutory context is taken into account, Plaintiffs' position is revealed as implausible," he added.
Sam Kazman, general counsel for the Competitive Enterprise Institute involved in both the D.C. and Virginia cases, said they are considering an appeal of the decision out of Richmond.
"Today's ruling, like the similar one that preceded it last month in federal district court in D.C., is a setback to the states that chose not to participate in the Obamacare insurance exchange program, and to the small businesses, workers and individuals in those states as well," he said. "It also contradicts established law on how statutes are to be construed, and ends up allowing the Administration to substitute its version of Obamacare for the law that Congress enacted."
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