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Northwest OH Legal Blog

Tuesday, February 11, 2014

Judge Rejects Lawsuit Aimed At Undermining Affordable Care Act And Upholds Premium Tax Credits Under Federal Insurance Exchanges

A legal challenge seeking to cripple The Affordable Care Act (ACA) suffered a major setback January 15, 2014 when as it was defeated in federal court. The case is Halbig v. Sebelius. The U.S. District Court for the District of Columbia granted summary judgment against the challengers, who argued that that the text of the ACA did not allow the law's premium tax credits to be offered on federal insurance exchanges and that they must only be available through state-based exchanges.

Judge Paul L. Friedman called that argument "unpersuasive," and said it ran counter to the central purpose of the Affordable Care Act. In a 39-page decision Judge Friedman wrote: “Plaintiffs' proposed construction in this case – that tax credits are available only for those purchasing insurance from state-run Exchanges – runs counter to this central purpose of the ACA: to provide affordable health care to virtually all Americans," He further said "Such an interpretation would violate the basic rule of statutory construction that a court must interpret a statute in light of its history and purpose."

The judge found that the federal exchanges -- which the Obama administration is constructing for 34 states that declined to build their own -- "would have no customers, and no purpose" if the challengers' logic were adopted.

The court further stated: "In other words, even where a state does not actually establish an Exchange, the federal government can create 'an Exchange established by the State under [42 U.S.C. § 18031]' on behalf of that state,"

The challenge was seen as a longshot from the outset given the fact that government agencies generally have broad discretion to interpret ambiguities in the law under Chevron v. Natural Resources Defense Council. The I.R.S. has ruled that federal exchanges may provide subsidies. Reviewing the ACA as a whole, the court found that law was unambiguous on this point. Another problem was the lack of evidence that congress sought to limit the premium tax credits in this manner.

Tim Jost, a professor of health law at Washington and Lee University who supports The ACA commented: "This argument made no sense from the beginning," "Congress clearly did not mean to exclude residents of two thirds of the states from premium tax credits. Judge Friedman had little trouble finding that the statute clearly authorizes premium tax credits to be granted through federal exchanges. He did not even have to defer to the agency’s interpretation of the statue. His reasoning is persuasive, and will be upheld by the appellate court."

The Plaintiffs say they will appeal.  Several other similar lawsuits have been filed in federal district courts in Indiana, Oklahoma and Virginia, which remain pending.


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