WASHINGTON – A powerful federal appeals court dealt a major blow to ObamaCare on Tuesday, ruling against the legality of some subsidies issued to people through the Affordable Care Act exchanges.
A three-judge panel ruled 2-1 on Tuesday that the IRS went too far in reinterpreting the language in ObamaCare to extend subsidies to those who buy insurance through the federally run exchanges, known as HealthCare.gov.
The case, Halbig v Sebelius, is one of the first major legal challenges that cuts to the heart of the Affordable Care Act by going after the legality of massive federal subsidies and those who benefit from them.
In the case, the plaintiff claimed the Obama administration – in particular, the Internal Revenue Service -- is breaking the law by offering tax subsidies in all 50 states to offset the cost of health insurance. The suit maintains that the language in ObamaCare actually restricts subsidies to state-run exchanges -- of which there are only 14 -- and does not authorize them to be given in the 36 states that use the federally run system, commonly known as HealthCare.gov.
The ruling, though likely to be appealed, could threaten the entire foundation of the newly devised health care system. Nearly 90 percent of the federal exchange’s insurance enrollees were eligible for subsidies because of low or moderate incomes that the outcome of the case could potentially leave millions without affordable health insurance.
“We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly,” the ruling stated.
A total of $1 trillion in subsidies is projected to be doled out over the next decade.
A U.S. District Court previously sided with the Obama administration on Jan. 15.
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