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Saturday, June 15, 2024 | Back issues
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Obamacare Subsidy Case Picked Up by SCOTUS

(CN) - The Supreme Court on Friday agreed to hear a challenge to the tax subsidies that are the underpinning for the Affordable Care Act.

The case the justices agreed to hear, King v. Burwell, is from Virginia. It was filed by four people challenging a provision of the law requiring them to either buy insurance or pay a penalty. Each claimed that if had not been for the existence of the subsidies, they would have been eligible for a hardship exemption.

The plaintiffs contends the tax subsidies were only intended for people who live states that have their own exchanges. They argue Congress intended that distinction in order to encourage state participation in the program.

But the Internal Revenue Service interpreted the law differently, issuing a regulation saying the subsidies are allowed regardless of whether the exchange is run by a state or by the federal government.

The justices did not explain why they chose to take up the case, but there decision comes after an usual confluence of events.

In July, a divided U.S. Court of Appeals for the District of Columbia invalidated the IRS regulation that made subsidies available for qualifying middle- and low-income consumers whether they bought health insurance coverage on a state exchange or one run by the federal government.

"We reach this conclusion ... with reluctance," wrote U.S. Circuit Judge Thomas Griffith in the majority's opinion. "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.

Then, less than two hours later, 4th U.S. Circuit Court of Appeals ruled against the four King plaintiffs.

In explaining the 4th Circuit's ruling, U.S. Circuit Judge Roger L. Gregory wrote that it's clear the tax credit/subsidies are essential to fulfilling the Health Care Act's primary goals, and that Congress was aware of their importance when drafting the bill.

"The IRS Rule advances this understanding by ensuring that this essential component exists on a sufficiently large scale. The IRS Rule became all the more important once a significant number of states indicated their intent to forgo establishing Exchanges," Gregory wrote.

"It is thus entirely sensible that the IRS would enact the regulations it did. ... Confronted with the Act's ambiguity, the IRS crafted a rule ensuring the credits' broad availability and furthering the goals of the law. In the face of this permissible construction, we must defer to the IRS Rule," he added.

If the Supreme Court decides the D.C. Circuit was right, millions of people who received subsidies in the 36 states that use the federal insurance exchanges would instantly become ineligible for them, potential destabilizing the Obama administration's signature legislative accomplishment.

Reacting to the high court's decision to grant certiorari to the case, Doug Kendall, president of the Constitutional Law Center, express disappointment that the justice intend to weigh in on the case despite the fact the issue is still being actively litigated in lower courts.

Nevertheless, Kendell said, " [W]e remain very confident that the Court will ultimately find that both the text of the ACA and the intentions of Congress mandate a ruling for the federal government."

The Constitutional Law Center is representing Senate Majority Leader Harry Reid, House Democratic Leader Nancy Pelosi, and supporters of the Affordable Care Act in both in King and a similar case currently pending in the D.C. Circuit.

Elizabeth Wydra, chief counsel for the organization, said despite the speculation and conjecture that's bound to be inspired by the Supreme Court's decision to hear King, "The fact remains that this is a straightforward case about how we interpret statutes in this country. " No elected official in Congress or in the state legislatures at the time the ACA was passed held the view that the challengers are pushing today, and the members of Congress who shaped and drafted the law have gone on record in briefing in this case to set the record straight," Wydra said.

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