Two decisions regarding the permissibility of federal subsidies granted to ACA Federal Insurance Marketplace enrollees were released yesterday. The two courts arrived at opposite conclusions.
The far more significant court, the DC Circuit Court of Appeals, heard Halbig v. Burwell. The three judge panel voted 2 -1 in favor of Halbig. The majority believed that the language of the law is clear, unambiguous, and not open to interpretation of the IRS. Specifically, the Act clearly reads in Section 36(B)(b)(1) The “premium assistance amount” is based on the cost of a qualified health plan…enrolled in through an Exchange established by the State under Section 1311 of the Act. Importantly, the Court looked at the actions of Congress in the construction of the Act, and noted that the language was carefully considered by Congress and survived multiple iterations of the Act before it was passed. It was also clear to the Court that the section of the Act in question was designed to provide both “carrots” in the form of Federal funding for States to develop and run their Exchange and a degree of control over rules in the Exchange and a “stick” in the elimination of premium assistance (subsidies) for the residents of a state that did not develop their own Exchange.
The 4th Circuit applied different reasoning in King v. Burwell. In a unanimous decision, the Court acknowledged that “the Act says what is says” and that “it makes clear in plain language” that states that did not develop their own exchanges would thereby make their residents ineligible for subsidies. But unlike the DC Circuit, they did not stop there. Instead, they decided to consider the Act as a whole and found it riven with inconsistencies and ambiguities. They set aside the congressional record considered by the DC Circuit saying it was “unclear.” They found that the failure of certain states to set up their own exchanges triggered the Secretary of HHS’s duty to set up a federal Exchange, that Congress clearly intended every Exchange enrollee to be considered for a subsidy and that the IRS acted within its legal scope in drawing an interpretive conclusion in the face of plain language law to the contrary. Curiously, Senior Judge Davis noted in his concurrence that Congress should revisit the Act and change it to make it clear that federal Exchange enrollees are eligible subsidies. If the language does not matter, why should Congress act at all?
Ultimately this issue comes down to a judicial point of view as to whether the language in Section 36 (B) is a “feature” of the Act (meaning deliberate) or a “bug” (meaning a mistake). These two judicial viewpoints will be the contested ground of myriad lawsuits yet to come. Since these are unlikely to be reconciled we can expect a minimum of two ACA related cases in the Supreme Court per session as far as the eye can see.
So does this change anything right now with the ACA? The short answer is “no.” The Halbig plaintiffs asked the Court to immediately enjoin the government from providing subsidies to enrollees in state health insurance marketplaces and the Court denied that request. The Obama Administration will undoubtedly ask for, and receive, an en banc hearing by the full Circuit Court of the Halbig case. And since it has packed the DC Circuit with 4 additional jurists (even though it had 8 active judges and 6 senior semi-retired judges and had so few cases it took off 4 months in 2013) it should like its odds.
The best indicator of how little this decision means in the near future was the stock market’s reaction to the news. Health insurer stocks barely budged. But make no mistake; these are big decisions and a case on this matter will almost certainly move to the Supreme Court next year. A decision would likely come down in June of the presidential election year. It does not get much more high stakes than that.