Obamacare Subsidies Are Going Back to Court

The future of Obamacare subsidies in 36 states will be reconsidered in court—this time in a situation more favorable for the White House.

The U.S. Court of Appeals for the District of Columbia Circuit announced Thursday that it will reconsider a three-judge panel's July decision eliminating insurance subsidies for coverage bought on the federal exchange. The 2-1 ruling would make the subsidies illegal for more than half the country, rendering health coverage unaffordable for many and dealing a major blow to the foundation of the health care law if ultimately upheld.

A recent report from the Urban Institute estimated that 7.3 million people could lose out on $36 billion in financial assistance if the federal subsidies are nullified.

Thursday's court order means the July opinion is invalidated, and the case will be heard by the full D.C. Circuit Court. The announcement is good news for the Obama administration, which requested that the court rehear the case.

While the three-judge panel was comprised of two Republican appointees and one Democratic appointee, the majority of active judges on the full D.C. Circuit were tapped by Democratic presidents. There are 11 active judges on the court, seven of whom are Democratic appointees. Two senior judges who were on the three-judge panel -- one Democrat and one Republican -- will also weigh in.

In the original Halbig v. Sebelius decision, the court sided with challengers who argued that the provision of subsidies on the federal exchange is illegal because the Affordable Care Act specifically authorizes them in "an exchange established by the state."

The government says that this reading of the law is too narrow, and that Congress clearly intended for the tax credits to be provided equally on all insurance exchanges.

On the same day in July, another court ruled the opposite way in King v. Burwell, with the U.S. Court of Appeals for the 4th Circuit rejecting a similar lawsuit that aimed to block insurance subsidies on the federal exchange.

The split court decisions raised the possibility that the issue could be elevated to the Supreme Court next session. Challengers in the King case appealed the decision directly to the Supreme Court, while the administration appealed the Halbig decision to the full D.C. Circuit.

The D.C. Circuit's decision to rehear the case dims the prospects of Supreme Court involvement, as the conflict in rulings would be resolved if the full court ultimately sides with the administration.

Oral arguments will be heard Dec. 17.

(Image via zimmytws/Shutterstock.com)