The Obama Administration received mixed messages yesterday when two federal appellate courts issued contradictory rulings on whether tax credits are available for individuals to purchase health insurance from federally facilitated Exchanges operating in 36 states. The U.S. Court of Appeals for the D.C. Circuit delivered a stiff rebuke to the Obama Administration, issuing a 2-1 ruling vacating an IRS regulation that allowed the use of tax credits for all Exchanges, whether federally facilitated or established by a State. In Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014), the D.C. Circuit held that the plain and unambiguous meaning of the Affordable Care Act tax credit provision, 26 U.S.C. § 36B, limited the availability of subsidies to insurance purchased on Exchanges “established by the State under Section 1311” of the ACA. Some two hours later, however, the U.S. Court of Appeals for the Fourth Circuit, in King v. Burwell, No. 14-1158 (4th Cir. July 22, 2014), reached the opposite—and unanimous—conclusion, holding that the language of the Affordable Care Act is ambiguous and, because the rule advances the ACA’s broad policy goals of increasing health care coverage and reducing the costs of health care, the IRS’s interpretation of the statute is reasonable and entitled to deference. Our client alert on these cases is available here.
