IRS regulation granting subsidies to those who sign up on federal Obamacare exchange stricken
William A. Jacobson
Legal Insurrection
7/22/2014
UPDATE: Whipsaw: 4th Circuit upholds Obamacare federal exchange subsidy after D.C. Circuit rejects
Full opinion and Judgment at bottom of post
Decision just released in Halbig case. Here’s the punchline:
Section 36B of the Internal Revenue Code, enacted as part of the Patient Protection and Affordable Care Act (ACA or the Act), makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces—known as “American Health Benefit Exchanges,” or “Exchanges” for short—that are “established by the State under section 1311” of the Act. 26 U.S.C. § 36B(c)(2)(A)(i). On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. § 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act. See 26 C.F.R. § 1.36B-2(a)(1) (hereinafter “IRS Rule”).
Appellants are a group of individuals and employers residing in states that did not establish Exchanges. For reasons we explain more fully below, the IRS’s interpretation of section 36B makes them subject to certain penalties under the ACA that they would rather not face. Believing that the IRS’s interpretation is inconsistent with section 36B, appellants challenge the regulation under the Administrative Procedure Act (APA), alleging that it is not “in accordance with law.” 5 U.S.C. § 706(2)(A).
….Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges “established by the State,” we
reverse the district court and vacate the IRS’s regulation.
What problems does this create? Massive. All the millions of people who signed up for Obamacare on the federal exchange — and the true numbers were disputed — expecting to get tax credits as subsidies now will not get those subsidies…
The complete article, with the full opinion and Judgment, is at Legal Insurrection. Also at the site, Whipsaw: 4th Circuit upholds Obamacare federal exchange subsidy after D.C. Circuit rejects. Split in Circuits virtually guarantees Supreme Court will take case.
Related: White House To Ignore Court Ruling, Keep Handing Out Obamacare Subsidies
