Washington (CNN) — Two appeals courts reached differing decisions on Obamacare subsidies Tuesday, meaning a likely Supreme Court case on the key component of the health care law.
A three-judge panel of the D.C. Circuit Court of Appeals ruled 2-1 against the subsidies, while a similar panel of the 4th Circuit down the road in Richmond, Virginia unanimously backed the Obama administration.
The opposing rulings mean the next stop for the issue will almost certainly be the nation’s highest court in a case that represents the best hopes of the 2010 law’s conservative foes to undermine it.
In the first ruling, the D.C. panel decided the federal money that helped people afford health insurance only could go to those who signed up through exchanges run by states.
That’s what the law specified, the ruling said, meaning those who signed up through the federal exchange aren’t eligible for the subsidies that helped them afford coverage.
Only 14 states and the District of Columbia set up their own exchanges, meaning that the 4.7 million who signed up for subsidized health coverage overall under Obamacare through HealthCare.gov could be affected.
“Although our decision has major consequences, our role is quite limited,” the majority opinion said, noting the question was whether the Internal Revenue Service rule regarding tax credits was permissible under the 2010 Affordable Care Act.
“Having concluded it is not, we reverse” the lower court’s decision that had favored the Obama administration.
A few hours later, the 4th Circuit panel came to the opposition conclusion, with all three judges concurring. It said the IRS had the authority to establish the tax credits and that Congress intended them to be a central component of the laws.
For now, the law remains unchanged and the subsidized policies are unaffected until the legal case plays out, White House spokesman Josh Earnest told reporters. The Justice Department said the government would appeal the D.C. panel’s decision.
However, the potential long-term impact is huge.
If the Supreme Court ends up ruling against President Barack Obama’s administration, the result would wipe out subsidies and undermine a key component of the Affordable Care Act’s requirement that all Americans obtain health coverage.
The easiest fix — changing the law to specify that it allows subsidies for coverage purchased through the federal government as well as state exchanges — would mean reopening the debate over the laws that passed with zero Republican support.
Republicans now control the House and are expected to make gains in the November election, perhaps also gaining a majority in the Senate.
That means Obama and Democrats have no chance of getting Congress to approve such a change in the law despised by the political right.
GOP Sen. Ted Cruz of Texas, one of the leading crusaders against the health care law, called Tuesday’s ruling “a repudiation of Obamacare and all the lawlessness that has come with it.”
He argued the federal subsidies, such as tax credits to people who didn’t sign up on state exchanges, amounted to assuming funding powers the Constitution granted Congress.
Earnest, however, said the law clearly intended to provide subsidies for all who enrolled under Obamacare, and that the administration was confident in its legal position.