Eighteen states that implemented Obamacare in three discrete ways filed a legal brief Monday that says qualified Americans should enjoy the health law’s tax credits no matter where they live, effectively joining the fight against high-profile lawsuits that claim federal assistance should only flow to certain states.
Led by Virginia, the state attorneys general say Congress never intended to limit the income-based subsidies to states that opted to set up their own Obamacare marketplace. If that were true, residents in roughly two-thirds of the states would be cut off from financial aid under the law.
“There is no plausible reason to believe that Congress intended such a draconian result,” they wrote in a brief to the Court of Appeals for the District of Columbia Circuit, which will hold oral arguments on the case in December.
The brief was filed by five states that rely on the federal exchange and six states that run their exchanges as state-federal partnerships. Seven states with their own exchange joined them, fearing a ripple effect that could harm their Obamacare customers if the law is gutted in the federal-exchange states.
All sides of the political spectrum are represented, including red, blue and purple states in Mississippi, Maryland and North Carolina, respectively.
“No matter how you feel about the Affordable Care Act, its discounts make it possible for hundreds of thousands of Virginians to purchase their own private health insurance-and we can’t let a lawsuit from outside the state disrupt our right to those subsidies,” Virginia Attorney General Mark Herring said.
The Affordable Care Act allows people to shop for private health plans on state-based marketplaces. Those making 100-400 percent of the federal poverty level can enjoy an advanced tax credit that helps them pay their premiums.
Opponents of the Affordable Care Act say the law reserved income-based credits for customers who use an exchange “established by the state.”
They took that to mean the 16 exchanges set up by the states, and them alone. But the Obama administration says the law’s framers intended the federal government to stand in the shoes of the states that did not want to run their own insurance portals.
The full D.C. Circuit is considering the case after a three-judge panel ruled against the administration earlier this year. On the same day, the Fourth Circuit ruled in favor of the administration, producing a split in the federal appeals courts.
The Supreme Court is expected to signal in the coming days whether it intends to take up the case out of the Fourth Circuit, or if it will wait and see if the D.C. Circuit comes around to the administration’s view and eliminates the circuit split.
Plaintiffs who brought the lawsuits against the Obama administration say Congress wanted to use the subsidies to entice states to set up their own exchanges.
The state attorneys general say even if that were the case, there is a legal doctrine that would have required the federal government to notify states of the consequences of choosing to defer to the federal exchange.
They said Chief Justice John Roberts used the same doctrine in the landmark 2012 decision that upheld Obamacare’s mandates but made Medicaid expansion optional.
Various states complained they would lose existing federal funding for Medicaid if they refused to expand their programs. At the time, Justice Roberts wrote that states “were not on fair notice that participating in the Medicaid program would subject them to such a draconian, later-imposed condition.”