Federal Appeals Court: ObamaCare Subsidies Illegal, More Executive Overreach

A powerful U.S. appeals court has invalidated ObamaCare subsidies for health insurance obtained through the federally-run HealthCare.gov. The ruling is a major blow to the president’s signature health care law, all but ensuring the constitutionality of the law will once again be decided in the U.S. Supreme Court.

A three federal judges ruled 2-1 on Tuesday that the IRS overreached when they reinterpreted the language of the law in ObamaCare, extending subsidies to those who buy insurance through the federally run exchanges. The case, Halbig v Sebelius, is one of the first major legal challenges that cuts to the heart of the Affordable Care Act by going after the constitutionality of redistribution in the form of expensive federal subsidies and those who benefit from them.

In the case, the plaintiff claimed the Obama administration — in particular, the Internal Revenue Service — broke the law by offering tax subsidies in all 50 states to offset the cost of health insurance. The administration was attempting to limit the damage of the fundamental flaws within the law, such as higher-than-expected risk pools and various other enrollment misses. The administration is currently being sued by House Speaker John Boehner (R-OH) for  presidential overreach, which focuses on the president’s unilateral changes to the law via regulations such as this.

The suit maintains that the language in ObamaCare actually restricts subsidies to the 14 state-run exchanges and never authorized subsidies to be given in the 36 states that use the federally run system, or the unsecured HealthCare.gov.

The ruling will likely to be appealed, but could present a real threat to the entire government mandated health care system. The vast majority of the federal exchange’s insurance enrollees either received subsidies or flat-out free coverage under Medicaid CHIP programs.

“We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly,” the ruling stated.

The ruling brings the count to one and one, as a lower U.S. District Court previously sided with the Obama administration on Jan. 15.