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Fears heighten as lawsuit ruling that could kill ACA looms

The Obama administration is facing a potentially lethal threat to its healthcare reform law as a three-judge panel on the US Court of Appeals for the D.C. Circuit prepares to rule on a challenge to the Affordable Care Act.

The case Halbig v. Burwell challenges subsidies provided through federal exchanges under the Affordable Care Act to people in need of financial assistance to purchase comprehensive health insurance coverage.

The tax credits are essential to survival of the Affordable Care Act because without them, many Americans will be unable to afford the cost of comprehensive health coverage, leading to mass exemption from the Affordable Care Act’s individual mandate penalty and collapse of the entire program; exactly what opponents of the administration want.

With the D.C. Circuit Court ready to rule in the case, concern is growing among supporters of the Affordable Care Act that the court could rule against the administration, thus precipitating a crisis for the healthcare reform law.

A ruling against the administration could also have a powerful backlash for Democrats in the midterm elections as Republicans raise accusations that the administration has been spending without congressional authority, a violation of separation of powers that could lead to more talk of impeachment.

The fears are heightened by the fact that two of the judges on the three-judge panel are Republican appointees, whose comments during oral arguments have been widely interpreted to suggest they favor the arguments of the plaintiffs.

The Halbig plaintiffs include private individuals and small businesses in six states that have not established state exchanges. The motive of the plaintiffs is to obtain exemption from the individual mandate as required if they are found ineligible for tax credits.

The challenge to the Affordable Care Act arises from the wording of Sec. 36B(b) (A) of the law which states that premium tax credit is available to individuals who purchase health insurance through an "exchange established by the State."

The section of the Affordable Care Act reads:

The monthly premiums for... health plans offered in the individual market within a State… cover the taxpayer… or any dependent of the taxpayer… enrolled in through an Exchange established by the State under 1311 [1] of the Patient Protection and Affordable Care Act...

According to plaintiffs, it is clear from the text that only those who purchase private health insurance on state-run exchanges are eligible for premium tax credit, thus those who obtained health insurance from the federal exchange in the states that chose not to establish exchanges are ineligible for tax credits.

An aspect of the legal arguments relevant to ruling in the case is the question of intention of the legislators who crafted the law: Is the wording of the law and its apparent implication an oversight or was it the intention of the legislators to so limit eligibility for tax credits?

Supporters have argued that in the broader context of the Affordable Care Act, such restrictive interpretation based on a single clause could not reflect the intention of the legislators.

However, opponents of the law have argued that the wording reflects the intention of the legislators, and that it was crafted to provide an incentive for the states to set up their own exchanges and dissuade them from opting out after setting up their own exchanges.

In January, the federal district court for the District of Columbia issued a ruling in favor of the administration, saying that premium tax credits are available to individuals in the 34 states who purchase health insurance on federal exchanges.

Applying a precedent ruling in Chevron USA v. Natural Resources Defense Council, Inc., the court concluded that the interpretation of the statute that allowed the IRS to assess tax credits for individuals who did not obtain insurance on state-run exchanges was correct because it was clear from the broader context of the law that Congress intended to make tax credits available on all exchanges.

To support its argument, the court pointed out to Sec. 36B(f) of the law which applies its requirements of reporting on premium tax credits to exchanges without limiting its reference to state run exchanges.

However, there are indications that the Court of Appeals for the D.C. Circuit is predisposed to ruling in favor of the Halbig plaintiffs.

According to TPM, Judge Raymond Randolph, appointed by George W. Bush, said during oral argument in March: "If the legislation is just stupid, I don't see that it's up to the court to save it."

He reportedly said that the text of the statue "seems perfectly clear on its face" that the subsidies should apply only those who purchase insurance from state-run exchanges.

The other George W. Bush-appointee, Judge Thomas B. Griffith, also reportedly appeared skeptical of the Obama administration's arguments, emphasizing that the administration has a "special burden" to show that the language of the state does not mean exactly what "it appears to mean."

Acccording to TPM, Professor Turley, of George Washington University Law School, said: "If this case were decided on the basis of the statutory language, the advantage goes to the challengers. If the court is willing to broaden its interpretation then the administration may have an edge. It depends entirely on how the panel structures its analysis."

However, in the event of an unfavorable decision, the administration could request an en banc ruling in which a vote is taken by the full D.C. Circuit.

The full D.C. Circuit consists of seven Democratic appointees -- four of whom were appointed by Obama -- and four Republican appointees.