In the July ruling, the appeals court said the subsidies, which help people afford health insurance, may only be paid in states that have their own online health insurance exchanges. There are 36 states that lack their own exchanges, which are a central feature in the Obamacare system.
Five million people could be affected, analysts have estimated, if subsidies were to disappear from the federal marketplaces set up in states that did not create their own exchanges.
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Government lawyers wrote in a court filing that the July decision, if left intact, would "impose a severe hardship" on people who currently get the subsidies in the form of tax credits. The appeals court's ruling led to "harsh and illogical results," the government lawyers' court filing said.
The decision to hear the case again was made by the court's 11 active judges. Following a series of appointments to the court made by President Barack Obama, the court's Democratic appointees have a 7-4 majority. Two senior judges who were part of the original three-judge panel will also participate in the rehearing. One is a Republican appointee and one a Democratic appointee.
The three-judge panel that ruled in July was split 2-1, with two Republican appointees in the majority.
Separately, the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, in July ruled in favor of the Obama administration in an identical challenge.
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The plaintiffs in that case have already sought an immediate U.S. Supreme Court review of that ruling, but further action in the Washington appeals court could deter the justices from taking the case at such an early stage.
The case is Halbig v. Burwell, U.S. Court of Appeals for the District of Columbia Circuit, No. 14-5018.