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Obamacare Subsidies Already on SCOTUS Docket; D.C. Trailing 4th

By William Peacock, Esq. | Last updated on

Is there any doubt that the U.S. Supreme Court will take up Obamacare subsidies in its upcoming term? It'd be a heck of a surprise if they passed, considering the circuit split and rhe certiorari petition sitting on their desk.

The Fourth Circuit case, King v. Burwell, just reached the docket. The D.C. Circuit case, according to SCOTUSblog, could be headed for en banc review after the Obama administration appealed.

Though an en banc grant would delay the D.C. case, en banc or not, the subsidies issue seems destined for the Supreme Court -- a matter of when, rather than if.

4th Cir.: Federal ACA Subsidies a Matter of Chevron Deference

The appeal out of the Fourth Circuit, the first to reach the cert. pool, is a challenge to that court's holding that this is a ridiculously close call, but amounts to deferring to an agency's interpretation of an ambiguous statute.

Judge Roger Gregory, writing for the majority, took a holistic approach to the statute, noting that the statutory provisions which make it optional for states to create exchanges also require the Secretary of Heath and Human Services (HHS) to establish an exchange "on behalf of the state" when the state chooses not to. The argument is that is basically subbing for, and equivalent to, a state exchange.

As Gregory notes, there is scant legislative history or evidence to support either the interpretation that the subsidies were to motivate states to set up their own exchanges, or for the government's interpretation that subsidies were intended for all low-income individuals, regardless of the exchange used. A lack of legislative history and an arguably ambiguous statute (as a whole) mean that the government is free to "interpret" the statute.

"Having thus explained the parties' competing primary arguments, the court is of the opinion that the defendants have the stronger position, although only slightly," Judge Gregory noted.

The panel then shifted to Chevron Step 2 analysis: whether the agency's interpretation is "a permissible construction of the statute." As is often the case, Chevron deference was a foregone conclusion: The IRS interpretation broadens the pool of individuals receiving subsidies, and makes insurance affordable to more people -- exactly the purpose of the statute.

D.C. Cir.: Statute Says No Federal ACA Subsidies

Contrary to the Fourth Circuit's holistic take, the D.C. Circuit's majority focused narrowly on Section 36B. And that provision only provides for subsides for insurance policies "enrolled in through an Exchange established by the State," which supports the plaintiffs' contention that the IRS was not authorized to provide tax credits to individuals using the federal exchange.

To the majority, that text is pretty clear -- state exchanges are eligible for subsidies, while the federal exchange is not. The majority wrote that it came to its holding "reluctantly," of course, as it notes that if its holding stands, Obamacare will collapse absent legislative intervention.

When Will Cert. Happen?

Much like the gay marriage cases, the only thing that can stop the seemingly inevitable march to the Court is en banc petitions. The Supreme Court could hold over cases that have already reached the cert. pool until more cases work their way up the system. Doing so gives the Court more viewpoints and lower court opinions to consider. Either way, both cases seem like a when, not if, proposition.

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