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Two courts disagree on tax credits in Obamacare

WASHINGTON - Two appeals courts Tuesday reached radically different conclusions about whether millions of consumers in 36 states including Pennsylvania and New Jersey can use tax credits to help buy health coverage on the federal health insurance marketplace.

WASHINGTON - Two appeals courts Tuesday reached radically different conclusions about whether millions of consumers in 36 states including Pennsylvania and New Jersey can use tax credits to help buy health coverage on the federal health insurance marketplace.

The conflicting rulings, combined with two other challenges awaiting decisions, potentially tee up for the Supreme Court its next landmark health-care case and leave one of the Affordable Care Act's signature provisions in a state of legal limbo.

"The important thing for consumers to know is that they will keep their tax credits and coverage as this judicial process continues," said Anne Filipic, president of Enroll America, a national support group for the health-care law.

In the first ruling to become public, a divided panel of the U.S. Court of Appeals for the District of Columbia Circuit concluded in Halbig v. Burwell that the Obama administration stretched the 2010 health-care law too far in extending the subsidies through the federal HealthCare.gov website.

"We reach this conclusion, frankly, with reluctance," Judge Thomas Griffith wrote in the 2-1 decision. "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."

More bluntly, Senior Judge Harry Edwards, in his dissent, called the challenge a "not-so-veiled attempt to gut" the law.

The lead plaintiff, Jacqueline Halbig, is a former policy adviser to the Department of Health and Human Services under President George W. Bush. The defendant is HHS Secretary Sylvia Mathews Burwell.

The court's decision quickly revived the political debate that has raged since Congress approved the health-care law on party-line votes.

From the right, Texas Republican Sen. Ted Cruz cheered the D.C. ruling as "a repudiation of Obamacare and all the lawlessness that has come with it." From the left, Ron Pollack, executive director of Families USA, a health-care advocacy group, called the decision "the high-water mark for Affordable Care Act opponents."

Full review

The Justice Department said it would ask for the full D.C. court to review the decision, calling it "incorrect, inconsistent with congressional intent, different from previous rulings, and at odds with the goal of the law."

But as advocates were taking a closer look at the D.C.-based court's 42-page majority decision, the Richmond, Va.-based U.S. Court of Appeals for the Fourth Circuit reached the opposite conclusion about the same set of facts in a case called King v. Burwell.

In a unanimous decision, the three-judge panel called extension of the tax credits a "permissible exercise" of a federal agency's discretion in interpreting ambiguous legislative language.

"It is . . . clear that widely available tax credits are essential to fulfilling the Act's primary goals and that Congress was aware of their importance when drafting the bill," Judge Roger Gregory wrote. "The economic framework supporting the Act would crumble if the credits were unavailable on federal exchanges."

All agree the legal, political, and household consequences would be huge if the tax credits are voided.

In Pennsylvania, 258,455 people who selected an insurance plan on the federal exchange are getting financial assistance, or 81 percent of the 318,077 total. In New Jersey, 136,281 people, or 84 percent of the total 161,775 who signed up, are eligible for subsidies.

Across the country, 6.7 million people - 85 percent of everyone who has enrolled - are receiving advance premium tax credits for marketplace coverage; 70 percent of them - 4.7 million people - are in federal insurance marketplaces and could be affected by the D.C. court's ruling.

The subsidies issue is unrelated to Medicaid expansion.

On average, monthly premiums fell by 76 percent for people who received the tax credits, according to HHS. This dropped monthly premiums from $346 to $82 on average across all plan types. Sixty-nine percent of Americans who received the tax credits had monthly premiums of $100 or less, while 46 percent paid less than $50 per month, HHS data show.

Both three-judge panel decisions can be presented for a so-called en banc review by all of the judges on the circuit courts. The D.C.-based court has 11 active judges, seven of whom were appointed by Democrats. Four of these are Obama appointees, and Pollack of Families USA declared the full court "predictably will reverse" the smaller panel.

The Fourth Circuit has 14 active judges, nine of whom are Democratic appointees.

Disagreements among circuit courts are a recipe for Supreme Court action. Few doubt one challenge or another will eventually reach the high court.

The various challenges contend the complicated health-care law doesn't allow the federal government to provide subsidies - which help people purchase health coverage - in states that use the federal marketplace.

A section of the health-care law says the tax credits can be applied only to coverage purchased "through an exchange established by the state."

Drafting error

Only 14 states and the District of Columbia have established their own exchanges. The federal government has established exchanges in the remaining 36 states, including Pennsylvania and New Jersey, in most cases without state assistance.

The White House argued the language concerning state exchanges was merely a drafting error, which could easily be fixed if not for the polarized state of Congress. It further maintained that other aspects of the law make clear Congress intended to provide the tax credits in all states.

Accordingly, the IRS interpreted the section of the law broadly to authorize the subsidy also for insurance purchased on the federal health exchange.

"We feel very strongly about the sound legal reasoning of the argument that the administration is making," White House spokesman Josh Earnest said.

Dueling Court Rulings: What's Next for the Law

Kaiser Health News' Mary Agnes Carey answers several questions raised by Tuesday's conflicting court decisions on the Affordable Care Act's subsidies and how they may affect consumers.

Question: I live in a state with a federally run exchange (this is 36 states, including Pennsylvania, New Jersey, and Delaware) and I get a subsidy to help me buy coverage. Am I going to lose it?

Answer: Nothing is happening immediately. Justice Department officials said Tuesday they plan to seek an en banc review from the D.C. Appeals Court, meaning that the panel's full contingent of 11 judges would hear the case. Six of the court's judges would have to agree for the full panel to review the case. The full panel is dominated by judges appointed by Democrats, 7-4.

Eventually the case could be considered by the Supreme Court, but the current subsidies would likely remain in place until there is a final legal decision on the matter.

"In the meantime, to be clear, people getting premium tax credits should know that nothing has changed; tax credits remain available," said Emily Pierce, deputy director of the Justice Department's office of public affairs.

Q: Are these the only two court cases?

A: No. There are two other similar cases pending in courts in Oklahoma and Indiana.

Q: If there are legal disputes ongoing about who qualifies to receive a subsidy, do I still have to buy health insurance?

A: Yes. The law's "individual mandate," which requires most people to purchase health insurance or pay a fine, is still in place.

Q: What if I get my insurance through work?

A: This decision applies only to policies sold on

the online marketplaces. It does not affect work-based insurance, Medicare, or Medicaid, regardless of where you live.

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