On September 4, 2014, the D.C. Circuit vacated a panel decision in Halbig v. Burwell (Civ. No. 14-5018) striking down the federal government’s provision of premium subsidies to individuals purchasing coverage through the federal (versus a state based) exchange and agreed to an en banc review of the matter. The statutory provision governing the premium subsidies provides that such subsidies are available to those who enroll in coverage “through an Exchange established by the State under section 1311” of the Affordable Care Act (ACA). 26 U.S.C. § 36B(c)(2)(A)(i). The Exchanges under 36B also serve as a method of refundable tax credits through which the ACA subsidizes health insurance. See 26 U.S.C. § 36B(a). The IRS regulation being challenged states that subsidies shall be available to anyone “enrolled in one or more qualified health plans through an Exchange,” and then defines “Exchange” to mean state Exchange, regional Exchange, subsidiary Exchange, and federally facilitated Exchange. See 26 C.F.R. § 1.36B–2(a)(l); 26 C.F.R. § 1.36B–1(k); 45 C.F.R. § 155.20.
Appellants are a group of individuals and employers residing in states that did not establish Exchanges. They argue that since federal exchanges are not “established by the State” and are not established “under section 1311” but rather are established as a fallback provision in section 1321, premium subsidies cannot be provided to individuals who purchase insurance through them. On January 15, 2014, a D.C. District Court judge ruled in favor of the government holding that the ACA’s text, structure, purpose, and legislative history make “clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated Exchanges.” The district court further ruled that even if the ACA were ambiguous, the IRS’s regulation would represent a permissible construction entitled to Chevron deference.
On July 22, 2014, the D.C. Circuit ruled in favor of the plaintiffs/appellants holding that “applying the statute’s plain meaning, we find that section 36B unambiguously forecloses the interpretation embodied in the IRS Rule and instead limits the availability of premium tax credits to state-established Exchanges. . . . Thus, although our decision has major consequences, our role is quite limited: deciding whether the IRS rule is a permissible reading of the ACA. Having concluded it is not, we reverse the district court and . . . vacate the IRS Rule.”
The appellate court’s recent decision to hear the Halbig case en banc means the court will rehear the case first evaluated by a three-judge panel and vacates the panel’s prior ruling on July 22, 2014. According to the court’s briefing schedule, the case is expected to go through mid-November with oral arguments to follow and the possibility of a decision issued early next year (after the ACA’s second open enrollment period is underway).
The D.C. Circuit’s July 22, 2014 decision is available here and the Circuit Court’s order vacating the July 22 decision and ordering a rehearing en banc is available here. More background regarding the plaintiffs’ underlying complaint in district court is available in our October 28, 2013 Health Headline by clicking here.
Reporter, Juliet M. McBride, Houston, +1 713 276 7448, jmcbride@kslaw.com.
