A federal appeals court in the District of Columbia shocked supporters of the 2010 healthcare law Tuesday by ruling that millions of Americans would no longer be eligible for health insurance subsidies. Shortly thereafter, a panel at the U.S. 4th Circuit Court of Appeals in Richmond, Va., came to the opposite conclusion on a similar lawsuit, upholding the subsidies. The full D.C. Circuit should follow the 4th Circuit's lead and reject the first panel's ruling, which wildly misconstrues Congress' intent.
At issue is whether the Affordable Care Act provides subsidies to all eligible Americans, or only to those in the minority of states that operate their own insurance-buying exchanges. The subsidies are a crucial piece of the law's multi-pronged effort to reduce the ranks of the uninsured, along with requirements that insurers ignore applicants' preexisting conditions and that all adult Americans buy coverage. A recent study estimated that 34 states with federally managed exchanges will deliver subsidized policies to 7.3 million people by 2016, or more than 60 percent of their customers.
It's absurd to argue that a Congress controlled by Democrats would have imposed a nationwide mandate to buy coverage while withholding subsidies from some states' residents. Besides, eliminating subsidies would drive lower-income people out of the federally run exchanges unless they needed expensive medical care, causing premiums to skyrocket and prompting more people to go without coverage.
Yet in the messy and less-than-transparent process of crafting a bill from multiple committees' proposals, the drafters included a line saying that the amount of the subsidies would be based on the cost of the plan that a family had "enrolled in through an exchange established by the state." The IRS ruled that notwithstanding this provision, Congress intended subsidies to be available in all states. The plaintiffs in the lawsuits challenged the IRS' interpretation, contending that the availability of subsidies in their states made them subject to penalties if they refused to carry insurance or offer it to their employees.
Two judges on the D.C. Circuit panel actually bought the plaintiffs' argument, writing that neither they nor the IRS could stray from the plain meaning of the provision. The 4th Circuit panel disagreed, finding that the IRS' actions were consistent with Congress' well-documented intention to expand insurance coverage. They're right about that. If the D.C. Circuit panel's ruling prevails upon appeal, however, proponents of the 2010 reforms will have to persuade Republicans to help restore the subsidies and stop the system from collapsing — a fate that the latter seem to welcome, even as Obamacare has cut the percentage of uninsured Americans by almost a fifth. This is one appeal the administration can't afford to lose.