NCPA - National Center for Policy Analysis

Obamacare Continues to Face Legal Challenges

October 3, 2014

On Tuesday, an Oklahoma district court ruled that the Internal Revenue Service's (IRS) decision to grant subsidies to insurance enrollees in the federal exchange ran afoul of the law. The decision follows a July 2014 D.C. Circuit Court of Appeals decision in Halbig v. Burwell which came to the same conclusion.

Thomas Miller of the American Enterprise Institute explains the case. While the Affordable Care Act specifies that tax credits are only available to enrollees in exchanges "established by the state," the IRS decided to grant the credits to all enrollees, even those in exchanges not established by states, but by the federal government. That decision sparked the legal challenge in Oklahoma. 

The Oklahoma judge described the IRS's decision to grant subsidies to enrollees in the federal exchange as "arbitrary, capricious, an abuse of discretion not in accordance with law, pursuant to 5 U.S.C. section 706(2)(A), in excess of statutory jurisdiction, authority, or limitations, or short of statutory right, pursuant to 5 U.S.C. section 706(2)(C), or otherwise is an invalid implementation of the ACA."

According to Judge Ronald White, the idea that exchanges "established by a state" could possibly have meant "on behalf of a state," as the federal government tried to argue, was not believable. He saw no ambiguity in the statutory language and was not swayed by the Obama administration's arguments that the "larger policy purposes" behind the law warranted the IRS's interpretation. Ultimately, the judge cited language from an earlier Tenth Circuit case in explaining his decision: "[N]either the court nor the Attorney General has the authority to rewrite a poor piece of legislation (if, indeed, that is what it is). That responsibility lies solely with Congress."

Multiple lawsuits have challenged the IRS ruling. The Halbig case ruled in favor of the plaintiffs challenging the IRS, and the case will be heard by the full D.C. Court of Appeals in December. Additionally, the Fourth Circuit in King v. Burwell ruled that the IRS rule was valid, prompting plaintiffs to appeal the decision and petition the Supreme Court to review the case. The Oklahoma decision ruling against the IRS is being appealed by the defendants to the Tenth Circuit Court of Appeals.

Miller explains that only four of the Supreme Court's nine justices need to grant certiorari in order to hear the appeal in the King case.

Source: Thomas P. Miller, "As the courts turn: The continuing legal perils of Obamacare," American Enterprise Institute, September 30, 2014.   


Browse more articles on Health Issues