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Health care tax rule to get rehearing after split appeals ruling

Bloomberg News//September 5, 2014//

Health care tax rule to get rehearing after split appeals ruling

Bloomberg News//September 5, 2014//

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The full U.S. Court of Appeals in Washington will rehear a case on Patient Protection and Affordable Care Act tax subsidies, granting a government request in a move that may reduce chances of a new Supreme Court showdown over a central element of the Affordable Care Act.

A rehearing sets up the possibility that the full court will reverse the ruling of a three-judge panel that blocked subsidies for consumers on federal-run health exchanges, a key element to the 2010 overhaul of healthcare in America. Another U.S. appeals court, in Richmond, Virginia upheld the provision’s application to federal exchanges.

Eliminating the split would reduce, though not eliminate, the chances of the Supreme Court taking the case. Divisions between appeals courts are among the factors the justices consider when deciding whether to hear a case. In a short order Thursday, the Washington appeals court set aside the July ruling and scheduled new arguments for Dec. 17.

The question before the court involves tax subsidies that apply to more than half of the 8 million people who picked an insurance plan from October through mid-April, according to a report by the U.S. Department of Health and Human Services.

The dispute centers on whether the subsidies, in the form of tax credits, apply only to consumers in the 14 states that have set up ACA (popularly known as ‘Obamacare’) insurance marketplaces, or to the much larger group of people who buy insurance on the federal marketplace.

The Obama administration asked the full court to rehear the case after the three-judge panel struck down the Internal Revenue Service rule specifying that needy customers on both the federal and state marketplaces were eligible for the subsidies.

Hours after that July ruling, a federal appeals panel in Richmond unanimously upheld the IRS rule.

The decision to rehear the case underscores the influence of four judges appointed to the court by President Barack Obama since 2013. Three of those judges took their seats only after Senate Democrats changed the rules to let a simple majority confirm most presidential nominees.

Long dominated by Republican appointees, seven of the Washington appeals court’s judges were nominated by Democratic presidents and four by Republicans.

Two other judges who have taken semi-retired senior status, Democratic-appointed Harry Edwards and Republican-appointed A. Raymond Randolph, have the option of taking part in the rehearing because they were on the three-judge panel.

A divided Supreme Court in June 2012 upheld the core of Obamacare, voting 5-4 that Congress has the power to make Americans carry insurance or pay a penalty.

In the current set of cases, the Obama administration argues that Congress intended the subsidies to be granted to all eligible participants, whether buying insurance on state exchanges or on the federal marketplace operated by the U.S. in place of states.

Opponents, citing the language of the law, contend that subsidies are limited to marketplaces “established by the state.”

The plaintiffs in the Washington case objected to a rehearing, contending that the issue is important enough to go straight to the Supreme Court.

Their lawyer, Michael Carvin of Jones Day LP, also represents the plaintiffs in the Richmond case, and already has asked the Supreme Court to hear the matter.

The question of who is covered by the IRS rule “should proceed immediately” to final resolution by the Supreme Court, Carvin wrote in an Aug. 18 filing urging the Washington court to decline a rehearing.

At least two other challenges to the health-care tax credits are pending in federal courts in Oklahoma and Indiana.

The case is Halbig v. Sebelius, 14-5018, U.S. Court of Appeals for the District of Columbia (Washington). The Virginia case is King v. Sebelius, 14-1158, U.S. Court of Appeals for the Fourth Circuit, (Richmond, Virginia).

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