Supreme Court is asked to take up major challenge to Obamacare

The petition to the Supreme Court centers on text in the Obamacare law that appears to sharply restrict the provision of federal tax credits. Federal appeals courts issued opposing rulings on the issue last week.

Jonathan Ernst/Reuters
"Obamacare" supporter Margot Smith (L) of California pleads her case with legislation opponents Judy Burel (2nd R) and Janis Haddon, both of Georgia, as they rally on the sidewalk during legal arguments over the Patient Protection and Affordable Care Act at the U.S. Supreme Court in Washington, in this March 28, 2012 file photo. On Thursday lawyers asked the Supreme Court to take up the Affordable Care Act once again.

Lawyers challenging a central provision of President Obama’s health-care reform law asked the US Supreme Court Thursday to examine an issue that led last week to a judicial oddity: opposing, and nearly simultaneous, rulings by two federal appeals court panels.

The case marks the most significant threat to the future of the Affordable Care Act (ACA), also known as Obamacare, since the high court upheld the constitutionality of the law’s individual mandate in a 5-to-4 decision in 2012.

At issue is whether the administration acted properly when it enacted an IRS rule to negate a problematic section of text within the ACA.

The appeal stems from one of the two federal appeals court decisions issued last week. In one decision, a three-judge panel in Washington voted 2 to 1 to invalidate the IRS rule. In a second decision issued hours later, a three-judge panel in Richmond, Va., agreed with the administration and upheld the IRS rule. 

An administration defeat in the new case would essentially gut the ACA and prevent millions of low-income Americans from receiving tax credits to help pay for promised health insurance premiums.

Defenders of the statute say the problematic text is merely a typo.

Opponents say the law’s text is clear and that the courts should enforce it as written.

Specifically, the case, if accepted by the justices, would test the authority of a federal agency to interpret US law when the statute as written by Congress is considered ambiguous by the executive branch.

At the center of the litigation are two passages that appear to sharply restrict the provision of federal tax credits under the ACA.

The problematic text suggests that federal tax credits to support health insurance policies for low-income Americans can only be provided through health-care exchanges that were set up by participating states.

The ACA says the credits are to be administered through “an exchange established by the State under section 1311 of [the ACA].” The provision makes no mention of exchanges set up and administered by the federal government.

That would not be an issue if all 50 states had agreed to participate in Obamacare and set up their own health-care exchanges.

But the ACA has not been as popular as its supporters expected. Only 16 states went ahead and set up exchanges. The federal government moved to fill the vacuum in non-participating jurisdictions by setting up federal health-care exchanges in the remaining 34 states.

At some point officials recognized a discrepancy in the ACA. The IRS enacted a rule that sought to clarify that tax credits were available through both state and federal health-care exchanges.

Opponents of the health-care reform effort sued. Their lawyers argued that that the IRS could not use a rule to rewrite an unambiguous statute. The lawyers also argued that since their clients lived in states with federally administered health-care exchanges, the ACA’s mandates could not be enforced against them.

Since the two appeals courts reached different decisions it is up to the losing party in each case to decide whether to seek review at the Supreme Court.

Thursday’s appeal is from the Virginia decision handed down by the Fourth US Circuit Court of Appeals.

The plaintiffs in both cases were represented by the same appellate lawyer, Michael Carvin. And both cases are being coordinated and funded by the conservative Competitive Enterprises Institute.

“From the time these cases were first filed, we’ve tried to get this issue resolved as quickly as possible for the plaintiffs and the millions of individuals like them,” Sam Kazman, CEI general counsel, said in a statement.

“A fast resolution is also vitally important to the states that chose not to set up exchanges, to the employers in those states who face either major compliance costs or huge penalties, and to employees who face possible layoffs or reductions in their work hours as a result of this illegal IRS rule,” he said.

“Our petition today to the Supreme Court represents the next step in that process,” he said.

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