The U.S. District Court of Appeals delivered a huge blow to the Obama administration this morning, ruling that it’s illegal for the Internal Revenue Service to dole out tax subsidies for enrollees in the nearly three-dozen states on the federal Obamacare Exchange.
At issue in Halbig v. Burwell is whether the IRS has the authority to provide tax subsidies to enrollees in states that opted not to comply with Obamacare. A reading of the Affordable Care Act statutes in question (§1311 and §1321) confirms that the subsidies were meant to apply only to states with established Exchanges.
But the IRS, apparently unconcerned with the actual text of the law as passed by Congress, wrote rules to apply the subsidies to the federal Exchange, which didn’t exist until states refused to establish their own.
In a 2 to 1 decision this morning, a panel of judges from the U.S. District Court of Appeals agreed that the IRS overstepped its statutory authority, even though the majority acknowledged that the opinion will have major ramifications for healthcare policy.
“We reach this conclusion, frankly, with reluctance,” wrote Judge Thomas B. Griffith in the 42-page 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.”