WASHINGTON — President Barack Obama’s health care law could be dealt a severe blow this week if a U.S. appeals court rules that some low- and middle-income residents no longer qualify to receive promised government subsidies to pay for their health insurance.
The case revolves around a legal glitch in the wording of the Affordable Care Act, which as written says that such subsidies may be paid only if the insurance is purchased through an “exchange established by the state.”
That would seem to leave out the 36 states in which the exchanges are operated by the federal government.
A ruling could come as early as Tuesday.
The administration has argued that Congress intended to offer the subsidies nationwide to low-and middle-income people who bought insurance through an exchange, without making a distinction.
Lawyers and congressional staffers who worked on the 2010 law have described the problem as a classic wording glitch in a long and complicated piece of legislation.
In one part of the law, it says that states, which normally regulate insurance, could create exchanges that would help consumers and small businesses shop for coverage. The law also said if a state failed to establish an exchange, the federal government could step in and run one in its place.
A second part of the law described the subsidies that could be offered to low- and middle-income people to cover the cost of the insurance. This part of the law said these subsidies — or tax credits — would be offered for insurance bought on an exchange “established by the state.”
Apparently no one noticed the problem until the law was passed. Then, because of fierce political opposition and the 2010 Republican takeover of the House, supporters of the law could not fix the wording through an amendment. Moreover, the administration did not anticipate most Republican-led states would refuse even to create an insurance exchange for their residents.
The Internal Revenue Service adopted a regulation in 2012 that said individuals who qualify for subsidized insurance that is purchased on a government-run exchange may receive a tax credit, “regardless of whether the exchange is established and operated by a state.”
But the libertarian Competitive Enterprise Institute filed a suit, Halbig vs. Burwell, on behalf of several plaintiffs, contending this regulation is illegal.