July 23, 2014
Yesterday was either an earth shattering day in federal court for the Affordable Care Act, or it was a day that didn’t mean much at all. Which of these two visions gets the most attention depends upon who you ask.
What happened? Two separate federal courts were asked in separate cases to rule on a matter central to the Patient Protection and Affordable Care Act’s use of taxpayer subsidies in either health insurance exchanges created and run by the federal government or state-created federal health insurance exchanges. What is the difference? Under the ACA, the distinction between the two is very significant. Here is why.
Section 1311 of the Affordable Care Act establishes where a health insurance exchange is created by a state, and how taxpayer subsidies flow to those who qualify for subsidies within those state-created exchanges by language that specifically says, “established by a state.” Today, 14 states have created Section 1311 exchanges.
Section 1321 of the Affordable Care Act establishes where the federal government may establish a health insurance exchange in the absence of a state having done so, but with no language enabling the use of taxpayer subsidies to go to those who qualify for subsidies under 1311, if they attempt to buy coverage in the federally-sponsored exchange. Today, 36 states use the federal exchange under Section 1321 as they did not create a state exchange under Section 1311.
Those bringing these cases, the first being in the U.S. Court of Appeals for the District of Columbia in the Halbig v. Burwell case, assert that the ACA does not allow for any taxpayer subsidies to flow to those who might otherwise qualify for subsidies if the coverage is purchased in a federally-constituted exchange. The plain meaning of the language of the statute at section 1321 appeared to sway the court, who issued a 2-1 decision agreeing with the plaintiffs that no subsidies could exist in federally-constituted exchanges. Some viewed this as a mortal blow struck at the ACA.
Then, later in the same day but in the Fourth Circuit Court of Appeals in Virginia ruling in a similar case, upheld taxpayer subsidies in federal exchanges by a vote of 3-0.
Two federal courts on the same day ruled entirely differently on the same question under the ACA. What happens next?
The Obama Administration is highly likely to ask the full U.S. Court of Appeals for the District of Columbia to rule on this issue – so instead of the 3 judges that heard the first case, in a re-hearing the court would have all 11 justices hearing the case and issuing a ruling. The D.C. Circuit has 11 judges on it, 7 Democratic appointees and 4 Republicans. One might believe that in the full court the original outcome may be overturned and then coincide with the 4th Circuit decision and the law ultimately upheld – allowing for subsidies in federal exchanges. That’s just the next likely step.
After that, if it were to happen, the plaintiffs in the Burwell case will almost certainly petition a negative outcome to the U.S. Supreme Court – where these issues are more than likely to end up sometime during the court’s 2015 session.
At the end of the day what changed? Nothing. Subsidies continue to flow through federal exchanges and until the Supreme Court rules on the question, perhaps next year if the case reaches there, nothing changes.