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Health care subsidies issue rushed to Court (FURTHER UPDATE)

FURTHER UPDATE Monday 11:20 a.m.  The Supreme Court petition in King v. Burwell, filed by the challengers to the subsidies, has now been docketed as 14-114.   The government’s response is due September 3, unless it obtains added time to file.  By that time, the government may know whether the D.C. Circuit is going to rehear the case in that court, Halbig v. Burwell.  [Note:  The case page for King v. Burwell is now available here.]


FURTHER UPDATE Friday 5:46 p.m.  Acting swiftly, the D.C. Circuit on Friday called for a response from the challengers to the tax subsidies, with the filing on the question of en banc review due within fifteen days, and limited to fifteen pages.  The order is here.


UPDATE Friday 3:51 p.m.  The Obama administration went ahead on Friday with its plan to ask the U.S. Court of Appeals for the D.C. Circuit to reconsider, before the full en banc court, the decision that would bar tax subsidies to purchase health insurance on the “exchanges” operated by the federal government in thirty-four states.  The filing can be found here.  The government estimated that, so far, some 5.4 million people have obtained insurance on the federal exchanges, and eighty-seven percent of them did so with tax subsidies.   That works out to about 4.7 million individuals affected by this dispute.  The government counts thirty-four states as having federally run exchanges.  It is unclear, at this point, what effect — if any — this filing would have on the Supreme Court’s willingness to hear the petition discussed in the post below.  If it chose to await the outcome of the D.C. Circuit case, that could delay action on the underlying subsidies question.


Nine days after two federal appeals courts reached opposite rulings on a major new threat to the federal health care law, challengers pursuing that threat rushed to the Supreme Court on Thursday with a plea to step in and settle the dispute as soon as possible.   A petition for review was filed in a case from the U.S. Court of Appeals for the Fourth Circuit, which had rejected the challenge on July 22.  That conflicted directly with a ruling on the same day by the U.S. Court of Appeals for the District of Columbia Circuit (see this earlier post.)

At issue in the new case of King v. Burwell is whether government tax subsidies that have enabled millions of lower-income Americans to afford to sign up for individual health care coverage are illegal because they were granted for use on insurance marketplaces set up by the federal government.  Those exchanges are functioning in thirty-six states.

If those subsidies are now declared to be available only in the fourteen states that have created their own exchanges at the state government level, it is widely understood that this could cause the collapse of the entire economic edifice of the new health care law.  The number of customers getting insurance on exchanges in so few states, and the essential role the subsidies play in the overall scheme, apparently would mean that the pool of purchasers would be far too small to support the ACA nationwide, as it is now crafted.

The new law depends heavily upon insurance companies being able to afford new guarantees of coverage even for people with pre-existing medical problems, coverage for children on their parents’ policies even as the children become adults, and other improved health care financing.  The subsidies issue affects not only individuals shopping for insurance in the marketplaces, but also the duty of employers to provide health care coverage for their workers.  Both individuals and company participation are needed to help bring in younger, healthier individuals to help cover the expansion of coverage for those already troubled by medical afflictions.

The Affordable Care Act set up a system of marketplaces where individuals needing health insurance — and required by the Act to get it — could go to shop for coverage from a variety of insurance company offerings.  People unable to afford policies were offered tax subsidies that would put policies within their financial reach.

After the Act went into effect, the Internal Revenue Service wrote a regulation interpreting the subsidies provision in the ACA as applying to insurance marketplaces all across the country, whether operated by the states or by the federal government in states that had opted not to create such a marketplace.

In the case that reached the Supreme Court Thursday, the Fourth Circuit had upheld the IRS rule, concluding that Congress had spoken ambiguously on the subsidies issue, but actually had intended that those tax offsets would be available all across the country, because that would be necessary to create a sufficient pool of customers to make the ACA work.

The D.C. Circuit, by contrast, ruled that the specific language of the ACA on this point was not ambiguous at all, but rather spoke plainly in saying that subsidies were to be available only to customers on state-run exchanges.   Whatever Congress may have assumed about how many states would actually opt to join in the new marketplace movement, the D.C. Circuit concluded, Congress used clear language that limits subsidies to those marketplaces run by state governments.

The Obama administration has publicly announced that it will ask the D.C. Circuit to reconsider that decision before the full en banc court — a process that could take months, at least.

In the new petition seeking review of the Fourth Circuit decision, the challengers’ lawyers argued that Supreme Court review of the issue is inevitable, not only because of the existing conflict in lower courts, but also because there are now other lawsuits on the issue working their way through the lower courts, and unanimity in results is not a realistic prospect.  It is imperative that the Supreme Court not wait, and that it take on the issue as soon as it could grant review of the controversy, the challengers asserted.

The challengers laid out, on the opening page of their filing, a scenario of deep uncertainty that they said now exists in the wake of the conflicting rulings in the courts of appeals.

Here is the petition’s summary argument on that point:

“This is a challenge to the most consequential regulation promulgated under the Patient Protection and Affordable Care Act (“ACA”). Two Courts of Appeals have squarely divided over its facial validity.

“The resulting uncertainty over this major plank of ACA implementation means that millions of people have no idea whether they may rely on IRS’s promise to subsidize their health coverage, or if that money will be clawed back. Employers in 36 states have no idea whether they will be penalized under the ACA’s employer mandate, or are effectively exempt from it.

“Insurers have no idea if their customers will pay for health coverage in which they enrolled, or if large numbers will default. And the Treasury has no idea if billions of dollars being spent each month were authorized by Congress, of if these expenditures are illegal.  Only this Court can definitively resolve the matter; it is imperative that the Court do so as soon as possible.”

Unless the Court were to return from its summer recess to take up the issue in a special session, the earliest that it would be likely to act on the dispute would be this fall, when it will return for a new Term.  Such special sittings have occurred in the past when a truly important and urgent national controversy had reached the Justices.

In any event, the Court is unlikely to take any action on the new petition at least until the federal government has filed an answering brief.

Recommended Citation: Lyle Denniston, Health care subsidies issue rushed to Court (FURTHER UPDATE), SCOTUSblog (Jul. 31, 2014, 11:20 PM),