Tuesday, July 22, 2014

D.C Court of Appeals' Ruling Leaves Obamacare In Limbo

The Affordable Care Act is once again in question. A federal appeals court in Washington, D.C., ruled on Tuesday July 22, 2014 that the government funding cannot subsidize private coverage for residents in states that refused to set up their own insurance exchanges. Without federal subsidies, the ACA is subject to disintegrating. Underlying this perception of bad news about the Affordable Healthcare Act is a back-story that is quite the advertisement for the Healthcare Act.

A good portion of this lawsuit is driven by the complaints of one David Klemencic, a West Virginia man who says he does not want to buy health insurance. He feels if were it not for the government's generous subsidies, he would not have to. Under the Affordable Healthcare Act Klemencic could acquire health insurance as for as little as $21 a month. Without the ACA, he would be at the mercy of whatever provider he chose. Therefore, his lawsuit is making the case FOR the ACA instead of against it.

Here is Mr. Kleemencic's quandary.

"The district court determined that at least one of the appellants, David Klemencic, has standing. Klemencic resides in West Virginia, a state that did not establish its own Exchange, and expects to earn approximately $20,000 this year. He avers that he does not wish to purchase health insurance and that, but for federal credits, he would be exempt from the individual mandate because the unsubsidized cost of coverage would exceed eight percent of his income. The availability of credits on West Virginia's federal Exchange therefore confronts Klemencic with a choice he'd rather avoid: purchase health insurance at a subsidized cost of less than $21 per year or pay a somewhat greater tax penalty."

In layman's terms, the D.C. Circuit Court of Appeals is saying the Affordable Care Act (ACA) does not permit the IRS to distribute premium subsidies on exchanges established by the federal government.

If this ruling stands, it would affect 36 states.

Meanwhile, two hours later, the 4th Circuit Court of Appeals upheld the very same subsidies. They explained their ruling this way.

"The crucial language of the bill concerns subsidies advanced by the IRS via exchanges "established by the State." Plaintiffs in both cases argue that this excluded the federal health exchange - a major part of the law, as thirty-six states elected not to build their own exchanges. The D.C. Circuit Court found this morning, "with reluctance," that the language indeed prohibited the federal subsidies."

Translated: The 4th Circuit, meanwhile, ruled the language was not "determinative" and could be left to interpretation as opposed to regulation. In layman's terms, the 4t Circuit Court of Appeals is saying the language in Affordable Care Act (ACA) does not openly state the IRS cannot distribute premium subsidies on exchanges established by the federal government.

Will these two opposing court rulings in one day lead to a Supreme Court intervention? Not necessarily. It is possible the overturned D.C. ruling will go before the D.C. Circuit en banc, in which all eleven judges will rule on the case. The larger court skews more liberal than the three-judge panel that overturned the ruling meaning the D.C. Circuit could end up with the same ruling as the 4th Circuit.

See the full ruling HERE.

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