Court nixes Obamacare subsidies for Indiana, 35 other states

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The Obamacare tax credits that brought nearly $400 million to Indiana this year to help Hoosiers buy health insurance could go away after a federal appeals court ruling that they were illegal.

The U.S. Appeals Court in Washington, D.C., declared Tuesday that the law that created Obamacare did not authorize the federal government to give financial assistance to anyone buying coverage on the insurance marketplace run by federal authorities.

Indiana is one of 36 states participating in that federal marketplace, also called the exchange. Fourteen states set up their own marketplaces.

The decision, if it withstands an appeal, would deprive the roughly 100,000 Hoosiers who signed up for Obamacare insurance policies of the tax credits they received to buy a health plan.

Those credits averaged $4,032 per person in Indiana, reducing the cost of the health plans they chose by an average of 79 percent, according to data from the U.S. Department of Health and Human Services.

White House spokesman Josh Earnest said the decision would have "no practical impact" on tax credits as the case works its way through further appeals.

Some insurance experts had predicted, before Tuesday’s ruling, that the number of Hoosiers receiving subsidies could triple or more by 2016. That could bring more than $1.2 billion or more to the insurers selling Obamacare policies here.

“As more people understand how the tax credits work, I think more people are going to take advantage of them,” Indianapolis health insurance broker Tony Nefouse said earlier this month.

But the way Congress wrote the Patient Protection and Affordable Care Act makes clear that the subsidy is available only to consumers who bought plans on state-run exchanges, the appeals court ruled.

The law “unambiguously forecloses the interpretation embodied in the IRS rule and instead limits the availability of premium tax credits to state-established exchanges,” U.S. Circuit Judge Thomas Griffith wrote for the majority of a three-judge panel.

The state of Indiana filed a lawsuit in October making a similar claim. That suit sought to invalidate the tax subsidies so that the state and municipal governments, as well as large private employers, could not be penalized for not offering health insurance to their workers.

Obamacare includes fines on employers if they have more than 50 workers and one of their employees buys coverage on an exchange using a tax credit. If no tax credits are available, then the employer fines would never be triggered.

The judges reached their conclusion “with reluctance,” Griffith, an appointee of Republican President George W. Bush wrote. He was joined A. Raymond Randolph, who was nominated by President George H. W. Bush, also a Republican.

“Our ruling will likely have significant consequences both for millions of individuals receiving tax credits through federal exchanges and for health insurance markets more broadly. But high as those stakes are, the principle of legislative supremacy that guides us is higher still,” Griffith wrote.

U.S. Circuit Judge Harry Edwards, an appointee of Democratic President Jimmy Carter dissented, calling the decision a “not-so-veiled attempt to gut” Obamacare.

Only 14 states and the District of Columbia have opted to set up their own marketplaces, making delivery of tax credits via the federal exchange crucial to meeting the goal of broadening coverage in the U.S.

“A very large share of people need the subsidies,” said Robert Blendon, a professor of health policy at the Harvard School of Public Health in Boston. If the decision isn’t overturned, “it basically would significantly cripple the law,” Blendon said in an interview before the ruling.

The goal of Obamacare was to expand insurance coverage to more Americans so that doctors and hospitals would not have to shift the costs of providing care from the uninsured to those who do have insurance.

The law, passed in March 2010, aimed to do this in two ways: by giving states more money to expand eligibility for Medicaid programs and by awarding tax credits to individuals who purchase individual insurance via online exchanges.

Of the more than 8 million Americans who picked an insurance plan on the exchanges from October through April 19, 5.4 million selected one from the federal marketplace, according to a report by the Health and Human Services department.

According to the report, 85 percent of those picking a plan qualified for subsidies to reduce their premiums. In Indiana, 89 percent selecting plans on the exchange qualified for subsidies.

The government’s next step could be an appeal to the entire court. Seven of the court’s 11 judges were nominated by Democratic presidents, including four by Obama.


  • @John
    I'll be the first to agree that US healthcare system is not efficient and extremely expensive. This is one of the reasons for the initial support from some of Obamacare. they were ready for 'change'. Problem is we're quickly realizing how incompetent this admin is and just how bad obamacare is. Its far from an improvement. the old system needed fixed, however, affordable care act is not that fix and anything but affordable. As with our current tax code, our healthcare system needs a serious overhaul. the problem is our gov only pollutes the system when they attempt to 'fix' something. Our current admin who is either incompetent or corrupt is really good at pointing out our flaws but completely incapable in improving or finding solutions. They end up making things worse. We need to elect real thinkers into office instead of swift talkers. Proponents of obamacare point out its intentions, as with every liberal policy, but always fail to see its actual results. healthcare spending is not going down, its just being more heavily subsidized. the only thing declining will be actual care
  • taxpayer subsidized healthcare
    I've gotten very tired reading comments 'opposing government (e.g. taxpayer) subsidized healthcare insurance'. About 55% of Americans get their employer 'provided' healthcare insurance with a $240B annual taxpayer subsidy - the largest tax loophole in the country. Add in the VA, government employees, Medicare (half paid for by taxpayer subsidies) and Medicaid - all subsidized by taxpayers - and there are only about 15% of the population who have no insurance or pay the full cost themselves. If you want to complain about the outrageous cost of healthcare in the US (compared to everywhere else in the developed world) then I'm with you.
  • Celebrating
    You've got it wrong. We are not celebrating the fact that people are uninsured (for any reason). We ARE celebrating the fact that this is another win for those of us who do not desire to sacrifice individual liberties for the sake of financial convenience. Just as we celebrate that the Seventh Circuit decided that we can retain our rights to raise our children in a state with traditional morals. Sometimes it IS necessary to protect the majority from the tyranny of the minority. So yes, we are celebrating this win, but you've got the reason wrong. We are celebrating a win for the freedom of not caving in to the desires of the two-percenters. It is a win for freedom from oppression.
  • 'intent' established by SCOTUS already
    If you have a problem with "intent", read up on SCOTUS decision. -- The majority voted for the law, and they knew perfectly well that it was going to need to provide subsidies on all the exchanges, in every state. -- Other parts of the law also give mentions that the exchanges setup by the Federal Government, are still State-restricted exchanges. In other words, they are still "state exchanges". -- The ruling should be cut and dry when it goes to the next levels. --In the mean time, the people who celebrate this particular decision, are celebrating the possibility of millions of Americans losing their health insurance and having their lives put in danger. Which speaks as much about them as it does about the case itself.
  • to Brett
    Without our employer subsidized insurance plans, neither the wife or I could afford our "non-Obamacare" plans through our work. And it's not a recent thing. The country has had this problem for decades. Very few people have ever been able to afford to fully insure themselves without assistance. -- The growth in the total healthcare costs has slowed down since the law was passed. As has annual premium increases. -- One of the things in this law that does help people against the insurance companies, is the mandate that minimum of 80% of the premiums you pay must go towards treatment instead of overhead. --There is no reason why we cannot insure everyone, and have a healthy economy. The two benefit each other, as a healthy worker is a good worker.
    • intent - Markus
      Laws are written down for a reason. It is to prevent confusion. A discussion that was had, that never made it into the final written version is only that - a discussion or debate. While it may have been the intent of a few, it clearly was not the intent of the majority or it would have been written down in the final version. For your logic, one could say that they never intended to pay their mortgage, that the payment language is just a drafting error... Nations are not governed by intent - unless they are a dictatorship, oligarchy, etc... Perhaps that's the true intent of Obamacare.
      • subsidize me
        this is no doubt going to the supreme court. either way, all subsidies do is hide the actual cost of obamacare. how many people tout the low premiums while ignore the fact that taxpayers are paying the additional costs. obamacare is working? hardly. it hasn't even been fully implemented. its going to get a lot worse, conveniently after this falls elections. if insurance companies continually need to be bailed out by federal gov then something isn't working. insurance companies will continue to raise premiums and the gov will hide the additional costs and true premium costs through gov subsidies. cost of healthcare will continue to rise as more sick sign up. For progressives they see this as good thing. more people have healthcare...they ignore what will result, high cost, low innovation, and stagnant job growth... as they do with every liberal policy funny to listen to progressives yell 'law of the land', yet continue to want to make changes out of thin air and ignore the actual wording in the law.
        • no intent intended
          sorry, cant have "intent" if no one knows what to "intend", hence Nancy's timeless words: https://www.youtube.com/watch?v=hV-05TLiiLU
        • IBJ?
          The IBJ was so quick to report on the DC circuits ruling, but acts like the 4th circuit doesn't exist.
        • to Rick
          The original intent of the law was to have each state setup its own exchange. A later amendment changed it so that states that did not want to set up exchanges, would have the Federal government set it up, for them. The intent of the subsidy was not between State or Federal government. It was every individual that qualified to apply for insurance through the exchanges. Other court cases all the way to the SCOTUS have looked into these occurrences in other laws and ruled that context matters more than a drafting mistake. No one had ever intended for the subsidies to only apply to State-setup exchanges, and NOT Federal exchanges.
        • 4th Court Upheld the provision
          In a separate decision 2 hours after this one, the 4th Circuit Court upheld the same provisions that this Court struck down. The full DC court is going to upheld the subsidies as well.
        • Obama can't spell...
          ...so the decision that this is 'il'legal will require Biden's explanation to the socialist-in-chief.
        • Not so fast
          This judgment was heard by only three of the judges on the Court, two of them Republican appointees. This will be going to the full, 10-member panel who will more than likely overturn this purely political decision. BTW, Obamacare is working. Time to get over it.
        • Whos Pays
          Re: Alan Why would I want to pay for your roads and schools? Build your own.
        • Cost Same
          The article erroneously indicates the cost of healthcare has been lowered. The cost is the same or more. The government is just paying for it. There is a misnomer that healthcare costs are being reduced by the ACA, not a fact, simply redistributing the funding source(s)
        • Roll Back?
          For the moment, hypothetically assume this ruling stands up through SCOTUS. At that point, anyone on the federal exchanges will have been paying premiums lowered by subsides deemed illegal. Does that mean the millions paid to the carriers in subsidies covering the difference in the actual premium must be returned to the government, and if so, wouldn't the carriers then demand the policy holders pay the full amount of the premiums, not only going forward, but retroactive to the day those policies went into effect, in other words hitting those individuals for an average of over $4K each that they're not expecting?
        • Oh yeah!
          I am dismayed any more by how quickly some cast off Court decisions as nothing more than judicial/political activism. That's not the way the "law" should work. Whether this portion of Obamacare should stand or fall, just like State marriage laws and whatever, should rest on sound legal principles and analysis and not which "party" appointed the Judge(s) in the case. That would be truly sad for all of us if true. As an attorney with over 37 years of practice that I am proud of, I hope they are wrong.
        • Who pays
          Why would I want to pay for your insurance? Buy your own.
          • A good lesson
            I guess this is what happens when we have to pass the bill in order to know what's in the bill.
          • SCOTUS will uphold this ruling
            The Prima Facie evidence is simply too strong to be overcome. Read the ruling. The fact is the provision authorizing the subsidy places that power/authority with each STATE that set up an exchange. Obamacare may not be dead yet, but it is on life support. 26 U.S.C. § 36B(c)(2)(A)(i) "(i) as of the first day of such month the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer is covered by a qualified health plan described in subsection (b)(2)(A) that was enrolled in through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act, and"
            • ACA
              Much to do about nothing. This will be heard en banc and the full court will overturn this republican judicial activism.
              • Snowball attempting to enter hell
                No chance of this standing. It's going to be quickly up help on appeal to full court. Now it is going to be interesting to observe those that celebrate this ruling, as they salivate at the possibility of millions of working Americans losing their health insurance, and risk losing their lives. If this decision is upheld, literally thousands of lives will be at risk.

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