D.C. Circuit Will Re-Hear Halbig Case Against Obamacare Subsidies

September 4, 2014 9:42 a.m.

The D.C. Circuit Court of Appeals has ordered a rehearing of a three-judge panel’s decision to invalidate Obamacare subsidies on the federal exchange.

The decision on Thursday means the case, Halbig v. Burwell, will be heard en banc — by all 11 active judges plus the two senior judges on the original panel.

The order to vacate the ruling is good news for Obamacare supporters. The divided three-judge panel that ruled against federal exchange subsidies in July consisted of two Republican appointees and one Democratic appointee. The en banc hearing will feature eight Democratic-appointed judges and five Republican-appointed judges. Four of the judges who will rehear the case were appointed by President Barack Obama.

En banc rehearings are rare and reserved for exceptional circumstances — in this case, health insurance subsidies for millions of Americans were on the line. The government requested an rehearing, while the plaintiffs urged the D.C. Circuit to let the original ruling stand and have the Supreme Court make a final judgment.

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In the original ruling, two judges argued that the plain text of Obamacare confined the subsidies — technically premium tax credits — to Americans buying from state-run exchanges. That effectively invalidated the IRS rule which permitted subsidies in the 36 states which declined to build their own Obamacare exchange and turned the task over to the federal government.

Judge Thomas Griffith, writing for the court, concluded that “a federal Exchange is not an ‘Exchange established by the State,’ and section 36B [of the Affordable Care Act] does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges.”

The dissenting judge, Harry T. Edwards, argued that the statute as a whole makes amply clear that the subsidies are permitted for residents on the federal exchange. He called the ruling a “not-so-veiled attempt to gut the Patient Protection and Affordable Care Act.”

If the full D.C. Circuit court reverses the three-judge panel’s ruling, it would be a huge blow to those seeking to overturn Obamacare’s federal exchange subsidies. Two trial court judges and a unanimous three-judge panel on the 4th Circuit Court of Appeals have upheld the subsidies. The plaintiffs can only definitively win the case at the Supreme Court, and legal experts say the justices are less likely to review it if there is unanimity in the lower courts.

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