Federal Courts Zig and Zag on Obamacare Tax Credits

index1Obamacare opponents’ hearts rose this morning, as a three-judge panel of the DC Circuit Court of Appeals struck down the power of federal Obamacare exchanges to pay out tax credits to health insurers who sign up beneficiaries for subsidized Obamacare coverage. Because most states declined to set up their own Obamacare health insurance exchanges, subsidies to insurers would have come to a screaming halt in most of the country. Opponents have long hoped that such a decision would force the Administration back to the negotiating table with Congress.

However, merely a couple of hours later, the 4th Circuit Court of Appeals in Richmond, VA upheld the Administration’s position: That federal exchanges have the same powers as state exchanges to pay out subsidies to health insurers. The Administration plans to appeal the DC panel’s decision to the entire DC Circuit, en banc (i.e. all eleven judges).

According to NCPA’s Devon Herrick: “Both these rulings expose yet more flaws in Obamacare that need to be addressed. Many exchange enrollees will undoubtedly be angered by the uncertainty, but many others would be relieved to be able to dump health plans they didn’t want in the first place. States need to act fast to allow individuals the opportunity to enroll in health plans previously outlawed under Obamacare. While Democrats will undoubtedly blame Republicans for ‘dragging their feet’ in the creation of state exchanges, the truth is that the federal government discouraged states from operating their own exchanges with onerous regulations, inflexible deadlines, and the promise that states that could merely opt out and allow the federal government to do the job for them.”

In light of both courts’ rulings, NCPA maintains its position. Namely, that that lawmakers focus on:

  • Creating a uniform tax credit for all enrollees, regardless of whether they buy in a state or federal exchange.
  • Streamlining the rules and allow flexibility for states that want to operate an exchange.
  • Increasing consumer choice by offering a wider range of health plans, rather than limiting the options to the pre-approved plans offered by the Obama Administration.

Comments (14)

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  1. Flyover Country American says:

    The ACA CLEARLY mandates that subsidies (i.e., other people’s money) are to be given only to those residing in states that run their own exchanges. Those in states such as Texas that did not set up their own exchange are not eligible, and therefore their insurance company should not be receiving other people’s money to help offload some of Obamacare’s financial burden.

    What the administration has attempted to do is unconstitutional, and every day that passes it is choosing to ignore the rule of law. How long are we going to let this administration change/break/ignore the rule of law??

  2. Freedom Lover says:

    The reason Obama wants an en banc review is so that he can keep his law “functional” through his cronies on the full Court of Appeals. He has named 4 of the eleven judges personally, and 7 of the eleven belong to his party. This will not be about upholding the rule of law, but about getting to keep unpopular and dangerous legislation the only way he can – by judicial fiat. Thank you Obama voters.

  3. Steve says:

    So all the subsidies given out so far have been illegal. Not only that, they have also been given to many people who should not have been eligible: http://healthblog.ncpathinktank.org/almost-anyone-can-claim-obamacare-tax-credits/.

  4. SPM says:

    While uniform subsidies would be more fair than the current legal and logistical mess the admin has gotten itself into, those subsidies are part of the problem. They redistribute income. They are a means by which some people pay for others’ healthcare. To me, that is a HUGE problem. What we need is personally accountability and consumer choice. HSAs will go a long way toward that end.

    • Bart I. says:

      I assume you don’t mean tax-advantaged HSAs, which also redistribute tax money.

  5. Steve says:

    This administration loves courts that rule in favor of their ideology, such as “gay right.” Yet, they interestingly disdain courts that actually try to uphold the law.

    • Buddy says:

      Well if the law doesn’t uphold their ideology, then it isn’t valid (to them).

  6. Mr. Freedom says:

    One of the suggestions for lawmakers is to streamline rules and increase flexibility in order for states to offer their own exchanges. This is indeed helpful for setting up exchanges. But, the feds had three and half years to set up theirs, along with basically unlimited amounts of taxpayer money, and still couldn’t do it right. I say we ought to let the federal exchange, along with the rest of the law, fail and be replaced.

    • Dale says:

      “I say we ought to let the federal exchange, along with the rest of the law, fail and be replaced.”

      I agree! Just leave it alone, let it crash and burn and then we can start anew.

  7. Big Truck Joe says:

    and I love the dissenting judges quote in USA Today “Judge Harry Edwards dissented, calling the challenge “a not-so-veiled attempt to gut the Patient Protection and Affordable Care Act” and warning that the panel’s ruling “portends disastrous consequences.” So does he disagree on constitutional or legal merits of the case or just because this action may gut Obamacare which he obviously finds troubling. I think his bias is showing.

  8. Bob Hertz says:

    Devon is right about the universal tax credit, but I sure do not hear Michael Cannon proposing that. Cannon seems content to just blow up the existing subsidies.

    I do not follow his writing closely, but this is my impression. Please correct me if I am arong.

    I also have a strong suspicion that Cannon does not rely on subsidies for his health care. A little dose of John Rawls may be in order for him.

  9. Frank says:

    Interesting, I’d like to see how this plays out. ‘m sure it’ll work out because it gives everyone an opportunity to go back to the drawing board.

  10. Bart I. says:

    It seems as though this is both an opportunity and a danger for Republicans. Laszewski thinks it’ll be a major headache if the ruling is upheld, and people start losing their subsidized coverage.

    On the other hand it could be an opening for Republicans to inject some reform into the insurance subsidy landscape, which includes both income-based subsidies on the exchanges and the tax exclusion for employer-sponsored coverage, in return for allowing the former to continue on federal exchanges.

    It’s not necessary to repeal either the ACA or the tax exclusion, and in fact it would be unwise to try either at this time. Just create a tax credit for those who don’t benefit from the other subsidies mentioned here that goes at least half the distance toward parity with the tax exclusion: either a flat 25% tax credit against insurance premiums, or a roughly equivalent fixed credit.

    The problem in the past was that parity in tax treatment for individual insurance would have undercut employer-sponsored group plans. But with the ACA requirements in place, this is no longer a concern.