What’s in the legal future for Obamacare as midterm elections come?

Different decisions in two federal courts change nothing, for now. But the Affordable Care Act still faces challenges

July 23, 2014 3:07PM ET

by Inside Story Team @AJInsideStoryAM

The Affordable Care Act, passed in 2010, is 2,400 pages long. This week saw two opposing legal rulings home in on one section: Who qualifies for the subsidies in the form of tax credits under the law?

To understand the rulings and their possible impact, remember that 14 states operate their own health care exchanges. Thirty-six states opted not to create and run exchanges, allowing Washington to do it online with Healthcare.gov.

Section 36-B of the ACA says that "tax credits go to people who buy health insurance in exchanges established by a state." A three-judge panel of the D.C. Circuit Court of Appeals used that specific language to strike down subsidies for the federal exchange.

Senior Circuit Judge Raymond Randolph wrote in concurrence with the opinion: "As Judge Griffith's majority opinion — which I fully join — demonstrates, an Exchange established by the federal government cannot possibly be an Exchange established by the State. Only further legislation could accomplish the expansion the government seeks."

If the ruling stands, it could wipe out financial assistance for nearly 5 million Americans who signed up through the Healthcare.gov federal exchange. And since the ACA requires everyone to buy insurance, those 5 million Americans, and more in the future, would take on more costs. An analysis by Avalere Health says these people will see, on average, a 76 percent increase in premiums, totaling billions of dollars.

None of this changed the reality that President Obama's signature legislation remains a political football, very much on the field right now. Speaker of the House John Boehner, R-Ohio, said in a statement:

Drew Angerer/Getty Images

“Today’s ruling is also further proof that President Obama’s health care law is completely unworkable. It cannot be fixed ... Republicans remain committed to repealing the law and replacing it with solutions that will lower health care costs and protect American jobs.”

On the same day, the U.S. Court of Appeals for the Fourth Circuit, in Richmond, Virginia, also weighed in on the law's subsidy wording. In a 3-to-0 vote, the court ruled that an Internal Revenue Service rule outlining federal subsidies and tax credits is legal, because it is essential to the structure of the law.

You don’t need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health care costs regardless of whether it was state officials or federal officials who are running the marketplace.

Josh Earnest

White House spokesman

The legal fights are not over. And the Obama administration is expected to appeal the ruling striking down federal subsidies. The Affordable Care Act could wind up before the Supreme Court. Again.

For now, the law is still the law; no one will lose tax credits for buying insurance. The ACA is four years old and still as controversial for some as it is popular for others.

How potent is it as an election-year issue?

Will candidates run on it, run against it or ignore it altogether?

Is going after the ACA still a winner in the view of Republican strategists, office holders and the like?

We asked a panel of experts for the Inside Story.

Simon Rosenberg

Simon Rosenberg is president and founder of New Democrat Network, a center-left think tank in Washington, D.C. Rosenberg, a veteran of two presidential campaigns, including the 1992 Clinton War Room, got his start as a writer and producer in network television. He is a leading political thinker and commentator.

Do these dueling court rulings affect the ACA?

No. I don’t think so because it was a mixed decision, it was one of many court cases. There have now been several courts ruling against conservatives judges yesterday. There is a widely held belief that this will be overturned.

The ACA is something so significant that has been debated with such intensity in the past few years that this will not add information that voters did not already have.

If you’re a Democrat such as Allison Lundergan Grimes, Mary Landrieu, Marc Begich, how do you campaign on the ACA?

The premise of your piece is correct: The way the ACA is playing out is a state-by-state thing. In Kentucky, Mitch McConnell has effectively embraced the exchange without giving Obama credit for it. There are other states where it is going to be viewed negatively.

What we do know is that the story and the data of the ACA indicate that in its early stages it is being far more successful than the public views it at this point. The Democrats have never really leaned into the ACA, owning it and embracing it in a way that is necessary to help it be where it should be. I think it is underperforming politically relative to its real-world impact. If people knew what it was doing, it would be much more popular.

In practice Democrats have not embraced it, which has made it a net negative.

Nicholas Bagley

Nicholas Bagley teaches and writes in the areas of administrative law, regulatory theory and health law. Prior to joining the faculty of the University of Michigan Law School, he was an attorney with the appellate staff in the Civil Division at the U.S. Department of Justice, where he argued a dozen cases before the U.S. Courts of Appeals and acted as lead counsel in many more. He also served as a law clerk to Justice John Paul Stevens of the U.S. Supreme Court.

What does the ruling mean, and what’s the next step?

We have a split decision: The D.C. Circuit Court invalidates the IRS, which wants to extend tax credits, while the Fourth Circuit Court of Appeals goes the other way. The question here is, where? There are two stages. The first stage is, any of the litigants can ask the full court of either of them to review the case. That kind of quest is unlikely to be successful in the Fourth Circuit, given the partisan makeup of courts. But likely in the D.C. Circuit Court, where new nominees that were appointed aren't as enamored with strict construction. We don't know for sure if this would go to the Supreme Court. If the D.C. Circuit Court repeals, then the Supreme Court may decline to intervene. On the other hand, judges may think this important case is sufficiently challenging that it ought to intervene.

How significant are subsidies in providing affordable health insurance to Americans?

They are critical. The biggest challenge for people who can't get insurance is that it is too expensive. Especially for those who can't afford it and they choose to devote resources to clothes and other essential resources. You eliminate this and you make it impossible for many people to get the kind of coverage that the ACA claims.

Paul Howard

Paul Howard is a Manhattan Institute senior fellow and director of the Manhattan Institute's Center for Medical Progress. He is also a contributor to The Apothecary, the influential Forbes blog on health care policy and entitlement reform. He has written on a wide variety of medical policy issues, including FDA reform, biopharmaceutical innovation, consumer-driven health care, Medicare and Medicaid policy, and health care reform.

Is going after the ACA still a winner in the view of Republican strategists, office holders and the like?

For the short term and in the long term, you will get two different answers. In the short term, undoubtedly a winner: With the Affordable Care Act's disastrous roll out of Healthcare.gov, the Obama administration's problems with the Veterans Administration, foreign policy issues and a lackluster economic rebound.

As the number of people taking advantage of the law rose to a sizable fraction of the previously uninsured, is there actually more risk in continuing to oppose the ACA?

As a result of the two Circuit Court decisions, no one is going to lose their subsidies. The administration will appeal to the full panel of judges in the D.C. Circuit Court. They may take the case and hear it or send it to the Supreme Court to get a definitive ruling that would take at least a year. For the time being, subsidies will continue to flow and chances of them stopping in the future is zero. Is there a risk for Republicans as more people enroll? Yes, there is a potential risk as the law becomes entrenched. It is possible that a year from now, 14 or 12 million people will be receiving subsidies and Medicaid coverage, and that would be an awful big risk.

But there is a risk to Democrats too. In terms of insurance premiums, they have gone up for those not getting subsidies. Even when fully implemented, there are 23 million Americans who will not be insured in the U.S.

The above panel was assembled for the broadcast of “Inside Story.”

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