In a dramatic split decision, two federal appeals panels disagreed Tuesday on the legality of Obamacare subsidies that gave billions of dollars to help 4.7 million people buy insurance on HealthCare.gov.
A panel of the appeals court that covers Washington, D.C., ruled 2-1 that the subsidies were and are illegal if issued through that federal exchange, as opposed to one set up by a state.
But about two hours later, a Fourth U.S. Circuit Court of Appeals panel ruled 3-0 in another case that the subsidies are legal for people who buy plans on HealthCare.gov, which the federal government operates in 36 states.
The two decisions can be read here.
The circuit split could mean the cases will soon land before the U.S. Supreme Court. For now, the subsidies remain in effect.
The stakes are immense, not least because of the value of the taxpayer-funded subsidies to Obamacare enrollees in two-thirds of the US.
The subsidies are also the linchpin to Obamacare's two mandates.
One mandate now requires people obtain affordable health insurance or pay a fine.The other, beginning in 2015, will require mid- to large-sized employers to offer such insurance to workers or pay a tax penalty.
If the subsidies aren't legal in HealthCare.gov-served states, the employer mandate would be eliminated in those states and the individual mandate would be effectively crippled.
The subsidies to HealthCare.gov enrollees were authorized by an IRS rule that was issued after the Affordable Care Act was passed.
But plaintiffs in several federal lawsuits claim that rule is not legal because the ACA only explicitly authorizes subsidies to enrollees on state-run exchanges. The ACA does not explicitly authorize subsidies being issued to enrollees on a federal exchange, although it does discuss the creation of such an exchange as HealthCare.gov if a state doesn't set up its own marketplace.
In the D.C. circuit case, the panel agreed with the plaintiff's controversial claim that only state-exchange enrollees can legally be granted such subsidies.
"Section 36B plainly makes subsidies available in the Exchanges established by states," wrote Judge Thomas Griffth, who was joined in the majority decision by Senior Circuit Judge Raymond Randolph on the case known as Halbig v. Burwell.
"We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up their own Exchanges, our ruling will likely have significant consequences both for millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly."