Obamacare survives another court challenge

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The last significant legal challenge to Obamacare suffered a setback today, when a Washington DC District Court rejected it.

Plaintiffs backed by the conservative Competitive Enterprise Institute are seeking to block health-care subsidies to low- and moderate-income consumers in 34 states where the federal government is either running or facilitating new health-insurance exchanges. They say the law restricts that support to states that operate exchanges on their own. But in a sweeping and closely argued ruling, Judge Paul L. Friedman thrashed that notion, saying that Congress “clearly intended to make premium tax credits available on both state-run and federally-facilitated exchanges.”

The dispute centers on a single phrase in the health care law. As written, it says the federal government will extend tax credits to qualified consumers who buy health coverage through insurance exchanges “established by the state.”

Represented by Michael Carvin, the lawyer who unsuccessfully challenged the Affordable Care Act before the Supreme Court in 2012, the plaintiffs claim that the phrase was no mere drafting glitch. According to their legal complaint, Congress intended to use the consumer subsidies as “carrots” to motivate the states to create their own insurance exchanges. “States rejecting the offer got a stick instead: the imposition of a federally-established, federally-operated exchange in the state, with no subsidies at all.”

Four years later, only 16 states and the District of Columbia are running their own exchanges. The other 34 have left the job to the feds. “That choice has left the federal government with the burden of establishing exchanges in those states,” the plaintiffs argue, “but without the burden of paying for premium-assistance subsidies to the residents of those states.”

The DC lawsuit—and a parallel suit still pending in Virginia — focus specifically on an IRS rule that authorizes premium assistance to anyone who meets the law’s means test, regardless of state residence. The plaintiffs say the IRS rule violates “the clear limitations that Congress imposed on the availability of the federal subsidies.”

The trouble is, there is nothing in the language or history of the Affordable Care Act to suggest that Congress wanted to restrict affordability to certain states. Judge Friedman acknowledges that the disputed phrase (“established by the state”) could have that effect if taken out of context. But “one cannot look at just a few isolated words,” he writes. The law’s history, structure and language all suggest that Congress offered the states a federal exchange option to help them participate in Obamacare—not to punish or exclude them.

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