Halbig v Burwell: D.C. Appeals Court Strikes Obamacare Health Insurance Subsidies

by Holland & Knight LLP
Contact

The U.S. Court of Appeals for the D.C. Circuit ruled, in a 2-to-1 decision, in Halbig v. Burwell that the IRS is not authorized under the Affordable Care Act (ACA) to provide tax credits intended to subsidize the cost of premiums of health insurance that individuals purchased on the federally-facilitated exchange. The Court did not order the subsidies stopped immediately, recognizing that the Obama administration will appeal.

The Court foundthat the Internal Revenue Service exceeded its statutory authority when it issued its May 2012 rule that provided health insurance premium subsidies (in the form of tax credits) to individuals purchasing coverage through the federally-facilitated exchange. To help low-income individuals purchase insurance through their exchange, the ACA provides subsidies in the form of tax credits, which should be administered "through an exchange established by the state." The ACA delegates primary responsibility to the states for establishing their own exchanges, but also provides that the federal government may establish and operate a federal exchange in any state that decides not to set up its own exchange. In its May 2012 rule, the IRS interpreted this provision to allow it to provide tax credits to qualified individuals "enrolled in one or more qualified health plans through an Exchange," including the federal exchange.

As a threshold matter, the court rejected the government's argument that Plaintiffs lacked standing, specifically because they had not suffered a concrete injury in fact. The court found that plaintiffs had standing because the subsidies effectively increased their incomes above the minimum threshold to be subject to the ACA's health insurance individual mandate. Thus, by bringing them within the scope of the individual mandate, the subsidies caused a sufficient injury for standing purposes.

On the merits, the court applied the traditional Chevron analysis, finding that the plain meaning of the ACA's statutory language clearly does not authorize the IRS to provide subsidies to individuals who enrolled in a health plan through the federal exchanges. The government's arguments to the contrary based on the ACA's legislative history and other considerations did not sway the court.

Only 16 states and the District of Columbia opted to create their own exchanges in time for the 2014 plan year.  Thus, if the subsidies are ultimately blocked, an estimated 7.3 million people — about 62 percent of those expected to enroll in federal-run exchanges by 2016 — could lose out on $36.1 billion in tax credits, according to a report from the Robert Wood Johnson Foundation. The success of the Affordable Care Act hinges crucially on the subsidies. The primary purpose of the law was to extend affordable health coverage to millions of Americans; the two main ways the law achieves this is through the Medicaid expansion and through subsidized coverage on the insurance exchanges.

Notably, just hours after the D.C. Circuit's ruling in Halbig v. Burwell, the Court of Appeals for the Fourth Circuit issued a contrary opinion in King v. Burwell, unanimously finding that the statute's ambiguity allows for subsidies for those who signed up using either state exchanges or federal exchanges. Together, these cases have had the unheard of effect of creating a circuit split in a single day, and this division will almost assuredly be compounded by two additional cases challenging the IRS's rule (Pruitt v. Burwell in the Eastern District of Oklahoma and Indiana v. IRS in the Southern District of Indiana), both of which are very likely to be appealed, regardless of their outcomes at the district level.

Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Holland & Knight LLP | Attorney Advertising

Written by:

Holland & Knight LLP
Contact
more
less

Holland & Knight LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.