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Federal judge limits health care subsidies

Deepening the controversy over tax subsidies to help lower-income workers obtain health insurance, a federal trial judge in Oklahoma on Tuesday barred those credits for individuals who shop for coverage on marketplaces run by the federal government, not by a state.

That issue is already awaiting the Supreme Court’s attention, with the federal government due to file there on Friday a defense of the subsidies scheme that has so far helped nearly five million individuals to afford health coverage under the Affordable Care Act.  (That case is King v. Burwell.)

In Oklahoma, U.S. District Judge Ronald A. White of Muskogee became the latest to rule on the dispute.  For the time being, his is the only ruling still in effect that would strike down the federal marketplace tax credits (and it is subject to appeal).

That was the same result reached by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit, but that decision has been set aside because of reconsideration by the en banc D.C. Circuit.  A hearing is set in that case for December 17.   The subsidies for individuals obtaining insurance on federally run exchanges were upheld by the U.S. Court of Appeals for the Fourth Circuit in the King v. Burwell case.

Meanwhile, a federal trial judge in Indianapolis, William T. Lawrence, is scheduled to hold a hearing a week from Thursday on a challenge by Indiana and thirty-nine public school districts in that state, seeking to block subsidies for those buying insurance on an exchange that is run by the federal government.  (In August, Judge Lawrence rejected a federal government request to dismiss that challenge; both sides have now filed motions for summary judgment — that is, rulings their way, without a full trial with witnesses.)

Indiana, like Oklahoma, has refused to set up its own health marketplace run by state agencies.  Under the federal health care law, the federal government thus has stepped in to set up such a marketplace in place of the state.   The government has argued in all of these cases that the subsidies scheme must be used for every exchange, no matters which level of government runs them, to get enough people into the system to make it work economically.

In Judge White’s ruling Tuesday upholding Oklahoma’s challenge to tax credits for the exchange in that state, he relied on what he found to be the clear language of the ACA on that point — that is, subsidies are only to be available on an exchange “established by the state.”  It was not his option, the judge said, to read the entire health care law to find reasons to make sure that the subsidy system worked in all exchanges across the country, federal and state.

Congress did not define what it meant by an exchange “established by the state.” However, the Internal Revenue Service has issued a ruling saying that this means any exchange set up in a state, no matter who is running it.   Rejecting that interpretation, Judge White said that “vague notions of a statute’s basic purpose are nonetheless inadequate to overcome the words of its text regarding the specific issue under consideration.”

If Congress in the ACA did not mean to confine subsidies to exchanges only if they are run by the states, it is free to amend the law, the judge wrote.

If, as expected, the Obama administration appeals his ruling, it would go to the U.S. Court of Appeals for the Tenth Circuit.


Recommended Citation: Lyle Denniston, Federal judge limits health care subsidies, SCOTUSblog (Sep. 30, 2014, 3:54 PM),