Back in July, a three judge panel of the D.C. Circuit Court of Appeals ruled that the tax subsidies provided by the Affordable Care Act could only be applied to policies purchased under exchanges established by an individual state, not to policies purchased via the exchange set up by the Federal Government for the 30-odd states that had declined to establish an exchange. As I had noted in the run up to the Court’s ruling in that case, such a decision has the potential to undermine the entire financial structure of the PPACA into chaos since many people who have been relying on subsidized premiums to afford health insurance would likely drop polices rather than pay full price, thus upending the risk pool. On the same day as the D.C. Circuit ruling, a panel of the 4th Circuit Court of Appeals ruled that the subsidies apply both to policies purchased on the state exchanges and policies purchased on the Federal exchange, thus setting up the kind of Circuit split that usually results in the Supreme Court granting an appeal. Today, though, the full D.C. Circuit upended that situation by granting the en banc appeal requested by the Federal Government:
A federal appeals court on Thursday set aside an earlier ruling invalidating subsidies tied the 2010 federal health care law in many states, pending a review by the full court, in a blow to opponents of the Affordable Care Act.
The U.S. Court of Appeals for the District of Columbia Circuit issued a brief order that granted the Obama administration’s request that the court reconsider the case with a full roster of judges participating. As part of that move, the court vacated its July opinion, issued by a three-judge panel, that struck down an Internal Revenue Service regulation that made subsidies for insurance purchases available nationwide to qualifying middle- and low-income consumers.
A key piece of the health law allowed subsidies to consumers who bought insurance on an exchange “established by the state.” The IRS rule, which implemented that portion of the law, said subsidies were available no matter whether a consumer bought coverage on a state or federally run exchange. The regulation has become important to the functioning of the law because most states didn’t set up their own exchanges.
An estimated 4.7 million Americans have received subsidies through exchanges run by the federal government.
The D.C. Circuit’s first ruling, from July, said the language of the health law didn’t allow for insurance subsidies on a federal exchange. The three judges that considered the case split 2-to-1 in ruling against the Obama administration. A different federal appeals court in Richmond, Va., issued a conflicting ruling the same day that upheld the IRS regulation.
A split in the appeals courts often prompts the Supreme Court to take up an issue, and the challengers in the Richmond case already have filed an appeal with the justices.
By reconsidering its case, the D.C. Circuit for now removes the conflicting rulings in the lower courts, clouding the prospect that the Supreme Court will eventually get involved.
The Plaintiffs in the Fourth Circuit case have already applied to the Supreme Court for a Writ of Certiorari, however the fact that the D.C. Circuit has taken this step likely means that, at the very least, the Justices will hold off ruling on that petition until the D.C. Circuit has ruled. At that point, if the D.C. Circuit ends up ruling for the government, as many suspect given the fact that the full court now has a majority of Judges appointed by President Obama, then there would be a distinct possibility that the Court may not accept the appeal at all, although the fact that there are other cases raising this issue pending in the Federal Court system may lead the Court to accept the appeal. In any case, at this point it seems unlikely that the Supreme Court will get to this issue in the October 2014 term. The D.C. Circuit has scheduled the hearing on this matter for December 17th, which means a decision in the case before late January or February unlikely. At that pace, it would essentially too late for either of the cases to get on the Court’s docket before the end of the term next June.
If nothing else, the Administration’s decision to seek en banc review in this case was a smart tactical move.
