Just when you thought it was safe to get back in the water,
the judges in Washington took another big chomp out of the Affordable
Care Act.
No, not the Supreme Court — this time it was the U.S.
Court of Appeals for the D.C. Circuit. In a 2-1 panel decision on
partisan lines, the appeals court ruled that the tax subsidies for
insurance coverage purchased from federal exchanges are illegal.
The
effect of the decision is to drastically undercut Obamacare by enabling
all 36 states that don’t have their own exchanges to exempt millions of
people from the individual mandate that they buy insurance.
Meanwhile,
across the Potomac River, the U.S. Court of Appeals for the Fourth
Circuit ruled the opposite way. It upheld the tax credits for state
exchanges as a permissible exercise of Internal Revenue Service
discretion to interpret an ambiguous statute. But the D.C. opinion is
the one that counts — it’s the one that could send the U.S. health care
system into a death spiral.
The background to these cases is a
little complicated, but bear with me. The Affordable Care Act required
the states to set up exchanges to enable their citizens and some
employers to purchase mandatory health plans. If the state does not set
up the exchanges, the law empowers the federal government to do so
itself. The purpose of the exchanges is, of course, to provide a venue
for buying insurance to those people who are required by law to have a
health care plan, known as “the individual mandate.”
For those who
cannot afford to buy the insurance — those making between 100 percent
and 400 percent of the poverty line — the law directed the IRS to
provide tax subsidies. The point of the subsidies is to get enough
people covered by the system to assure that it is viable and that
healthy people don’t opt out of coverage, leaving only the sick inside
the system.
Two summers ago, the Supreme Court famously upheld the
individual mandate. But 36 states chose not to create their own health
exchanges. In their stead the federal government established its own.
The D.C. Circuit case, Halbig v. Sebelius, involves those federal
exchanges.