Obamacare Subsidies Illegal Or Legal? Federal Court Decisions Conflict

Obamacare subsidies are illegal in 36 states, according to a D.C. Court of Appeals. No, wait. The Obamacare subsidies are so legal, says the Fourth District Circuit Court of Appeals in Richmond, Virginia.

So, which is it? One or both of the decisions will likely be appealed. The final ruling will undoubtedly have a huge impact on the viability of the Affordable Care Act (commonly known as Obamacare). Eliminating subsidies from 36 of the nation’s 50 states would all but kill the divisive legislation and cornerstone of President Barack Obama’s agenda and legacy.

The crux of the earlier decision — that is, the D.C. Court of Appeals decision, which found 2 to 1 that the subsidies are illegal, according to a report in The Wire, for 36 states — is that Obamacare only provides subsidies for people purchasing insurance from state-run exchanges. At the time the law was enacted, the legislators who passed Obamacare believed that all or the vast majority of states would set up these exchanges. In fact, at least according to the arguments of the victors, the subsidies were intended to be a reward of sorts for those states falling in line and complying with the Obama Administration’s preference that states set up their own health insurance exchanges.

If that decision stands (the Obama Administration is expected to challenge it), roughly 87 percent of those who purchased health insurance on healthcare.gov would be affected, according to a report in CNN Money. The subsidies are designed to ensure that those whose annual income is less than 400 percent of the national poverty level (currently $94,200 for a family of four) will not have to pay more than 9.5 percent of their total income for health care costs.

Obamacare enrollees with subsidies pay an average of $82 per month for their health insurance. Obamacare enrollees without subsidies pay an average of $346 per month, according to the CNN Money report.

The Fourth Circuit Court of Appeals decision was unanimous in its support for the subsidies, regardless of whether a state runs its own exchange or relies on the federal government to do so. The decision contends that the law’s intent presupposed that all or most states would run their own exchanges and gives the IRS broad leeway to interpret the applicable laws and guidelines “at the agency’s discretion.”

Whether Obamacare subsidies are ultimately deemed legal or illegal, many on both sides of the Obamacare debate are sure to question the wisdom of giving the IRS broad discretion in interpreting legislative guidelines.

What do you think? Will these legal challenges to the Affordable Care Act subsidies spell the end of Obamacare?

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