Federal courts rule Obamacare subsidies both legal and illegal; entire system may be gutted

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(NaturalNews) A three-judge panel for the federal court of appeals for the D.C. Circuit, the court that hears and decides cases pertaining to rules and regulations issued by federal agencies, has ruled that some health insurance subsidies provided under Obamacare are illegal.

Meanwhile, a separate three-judge panel at the Fourth U.S. Circuit Court of Appeals ruled later in the day that the subsidies were legal, creating more confusion over the law and setting up yet another potential Supreme Court case.

First, some background.

Tens of millions could be free of Obamacare mandates

Years in the making, four separate lawsuits have been prepared and have been winding their way through various courts in an effort to hollow out the unpopular law. As reported by The Washington Post:

The suits argued that Congress intended for the subsidies -- in the form of tax credits -- to go only to people in states that set up their own insurance exchanges, also referred to as marketplaces. They said it was meant as a "carrot," to entice states to embrace this part of the law. They cited a section of the law that said the subsidies would be available to those "enrolled through an Exchange established by the State."

Under provisions of Obamacare, only people who signed up in the 16 exchanges established by 15 states and the District of Columbia are eligible for subsidies; those who signed up for coverage under the federal exchange at are not. If that interpretation of the law ultimately stands, that would mean that some 4.7 million people would still be covered but would have to pay the full premium price themselves.

In the D.C. Circuit (Halbig v. Burwell), the three-judge panel ruled 2-1 that the IRS did not have the authority to issue its rule, because it misinterpreted the statute. Though the federal government may set up an exchange for a state, Circuit Judge Thomas B. Griffith wrote for the majority that the government "does not in fact stand in the state's shoes when doing so."

In the Fourth Circuit (King v. Burwell), however, which was decided unanimously by that three-judge panel, Circuit Judge Roger L. Gregory wrote "that it is not specified as to whether the subsidies should be available in states that declined to set up marketplaces," the Post reported.

As noted by CNBC, how this shakes out has tremendous implications for the law and the future financial health of thousands of American businesses and tens of thousands of people, "not least because of the value of the taxpayer-funded subsidies to Obamacare enrollees in two-thirds of the US."

"The subsidies are also the linchpin to Obamacare's two mandates," CNBC stated.

'Obama overreached'

The financial website further reported:

One mandate now requires people obtain affordable health insurance or pay a fine.The [sic] other, beginning in 2015, will require mid- to large-sized employers to offer such insurance to workers or pay a tax penalty.

If the subsidies aren't legal in states, the employer mandate would be eliminated in those states and the individual mandate would be effectively crippled.

The Affordable Care Act does not explicitly authorize subsidies being issued to enrollees on a federal exchange, although it does discuss the creation of such an exchange as if a state doesn't set up its own marketplace.

Longtime opponents of Obamacare were happy about the D.C. ruling.

"Today's decision rightly holds the Obama administration accountable to the law. The plain text of Obamacare authorizes subsidies only through state exchanges, not the federal exchange," said Sen. Orrin Hatch, R-Utah, ranking member of the Senate Finance Committee. "The court considered the Administration's justifications and came to an unmistakable conclusion: President Obama overreached."

The White House, however, sounded a confident tone.

"We feel very strong about the sound legal reasoning of the argument that the administration is making," White House spokesman Josh Earnest said. "There's a clear, commonsense case to be made here, which is that intent of Congress was to be sure that every eligible American who applied for tax credits to make their health insurance more affordable would have access to those tax credits whether or not the marketplace was operated by federal officials or state officials."


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