- The Washington Times - Tuesday, July 22, 2014

Millions of Americans are not entitled to government health insurance subsidies under Obamacare because of the way the law is written, a divided three-judge panel of the D.C. Circuit Court of Appeals ruled Tuesday.

But the force of the legal victory was undercut just hours later when another appeals court in Richmond sided with the Obama administration on the subsidy question, setting up an almost certain extended legal battle that could soon reach the Supreme Court.

In a decision that could blow a massive hole in President Obama’s signature domestic achievement, the court held that people living in states that relied on the federal government to set up their insurance market exchanges cannot offer the subsidies considered critical to making coverage affordable.

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The D.C. Circuit Court of Appeals ruled the administration used an IRS rule to stretch the meaning of the Affordable Care Act, which said financial aid to to low- and middle-income people should only flow to exchanges “established by the State.” If that means only state-run exchanges, it would cut off subsidies to two-thirds of the nation.

The 2-1 decision from a three-judge panel effectively invalidated the IRS rule that ensured subsidies flowed to every state, and the deciding judges seemed to realize the potential impact of the ruling.

“We reach this conclusion, frankly, with reluctance,” Judge Thomas B. Griffith said in his opinion for the court. “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.”

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Hours later, the U.S. Court of Appeals for the Fourth Circuit upheld the administration’s interpretation of where subsidies may flow, creating a split in the circuits. The judges in Richmond reasoned that Obamacare’s language was ambiguous and that the IRS rule was “a permissible exercise of the agency’s discretion.”

Yet the D.C. Circuit is widely viewed as the second-most powerful court in the land, and their edict will likely overshadow the Fourth Circuit for now.

The Obama administration is sure to appeal the D.C. circuit’s decision because the subsidies are a huge draw for Obamacare customers. Without that selling point, the reforms would effectively collapse under the weight of premiums that are no longer affordable.

White House press secretary Josh Earnest said the ruling will have no immediate impact on consumers’ ability to receive tax credits right now, and the administration is “confident” about the appeal that the Justice Department will be making.

“While this ruling is interesting to legal theorists, it has no practical impact,” Mr. Earnest said.

But Republicans wasted no time in cheering the blow to the White House, which comes on top of a Supreme Court victory in the Hobby Lobby case that allowed closely held corporations to ignore Obamacare’s contraception mandate.

“For the second time in a month, the courts have ruled against the president’s unilateral actions regarding Obamacare,” Speaker John A. Boehner, Ohio Republican, said. “The president has demonstrated he believes he has the power to make his own laws. That’s not the way our system of government was designed to work.”

Under the court’s ruling, only the 14 states and the District that have taken on the responsibility for their exchanges would be able to dole out premium tax credits to their residents.

Other states, most with Republican governors or state legislatures, refused to set up the exchanges, forcing the federal government to step in for them.

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