Grace-Marie Turner – The U.S. Circuit Court of Appeals has upheld the rule of law in its decision that the health law does not allow tax subsidies to be distributed through the federal government’s health insurance exchange.
The Obama administration’s Internal Revenue Service issued regulations in 2012 authorizing the flow of funds after two-thirds of the states opted not to create their own exchanges, thereby defaulting to the federal exchange.
In a 2-1 decision, the appeals court ruled that the law plainly states that tax credits to subsidize health insurance are to be available only through an “Exchange established by the State.”
Shortly after the DC Circuit decision was announced, the Richmond-based Fourth Circuit Court of Appeals ruled in a separate case that the law’s language does allow the subsidies to be distributed through the federal exchanges.
This sets up a very likely Supreme Court challenge.
The Galen Institute had argued in an amicus brief filed in both circuits and prepared with the very able counsel of Boyden Gray, Adam White, and Adam Gustafson:
“The Federal Government’s action, foisting the statutory subsidy-penalty framework upon States that elected not to establish their own Exchanges, thus imposes within those States the perverse consequences that the States sought to avoid: it subjects more lower income citizens to the individual mandate penalty and it imposes new penalties on employers (and thus deters businesses from moving to States in which no such penalties would have applied).
“In sum, the unlawful individual and employer penalties, imposed by operation of the IRS Rule in States that chose not to establish Exchanges, will amount to “more than $100 billion in unauthorized taxes,” based on Congressional Budget Office projections through 2023.”
The IRS ruling was one of 24 instances in which the administration has made significant changes to the law without legal authority. It is important that the influential DC Court of Appeals has sent a strong message to the administration that this cannot be tolerated in a nation built on the rule of law.