Friday, March 28, 2014
A three-judge panel heard oral arguments this week in one of several cases challenging federal subsidies to health-insurance purchasers on a federal exchange. We posted on those cases here. In short, the plain language of the ACA appears to authorize subsidies for health-insurance purchasers on state exchanges, but not on a federal exchange. This means that individuals who live in a state that declines to establish a state exchange--and instead relies upon a federal exchange--could not get a federal subsidy. So the IRS issued a rule providing subsidies to individuals who purchase on a federal exchange (as well as a state exchange).
That rule is what's at issue in these cases. The plaintiffs argue that the IRS rule (granting subsidies to purchasers on federal exchanges) is inconsistent with the ACA (which, they say, authorizes subsidies only to purchasers on state exchanges). Jason Millman over at the WaPo's Wonkblog explains the significance:
The subsidy question is central to the future survival of the law. Just 14 states and the District of Columbia are running their own exchanges in 2014, while the Department of Health and Human Services is operating 36 state exchanges.
About 85 percent of those signing up for insurance in federal-run exchanges have qualified for financial assistance to purchase coverage. Without those subsidies, the insurance would be less affordable, leaving those with the greatest health needs with more motivation to purchase coverage. That makes for a worse risk mix, driving up the cost of insurance to cover the sicker pool of people, creating what's known as an insurance "death spiral."
The D.C. Circuit is the first appellate court to hear arguments in these challenges. Some accounts said that the panel seemed split, or even leaning toward the plaintiffs, with Judge Raymond Randolph seeming to lean toward the plaintiffs, Judge Harry Edwards seeming to lean toward the government, and Judge Thomas Griffin seeming to be the panel's swing vote. The WSJ covered the arguments here; WaPo's Wonkblog coverd them here; and Bloomberg covered them here.