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Justice Department Seeks Review of Health Law Subsidy Ruling

By John Reichard, CQ HealthBeat Editor

August 1, 2014 -- Justice Department lawyers petitioned a federal appeals court late last week to overturn a July 22 ruling by a three-judge panel that declared health law subsidies to buy coverage are only lawful in states that have set up their own insurance exchanges.

The petition for rehearing en banc by the full U.S. Court of Appeals for the District of Columbia in Halbig v Burwell, if granted, would vacate the order by the panel that struck down an Internal Revenue Service rule authorizing subsidies in all 50 states plus the District of Columbia, said Washington and Lee University law school professor Timothy Jost.

The Obama administration could have taken longer before filing the petition. But Jost said it's in law supporters' interest to vacate the order as soon as possible and eliminate a split in circuit courts on the legality of subsidies in the 34 states that don't have their own exchanges and rely on the federal website healthcare. gov. On the same day the Halbig decision was handed down, the 4th Circuit Court of Appeals in Richmond, Va., ruled in King v Burwell that the subsidies are lawful in all states plus the District of Columbia.

Last week, the plaintiffs in the King case, represented by Michael Carvin of the Jones Day law firm in a challenge funded by the Competitive Enterprise Institute, petitioned the U.S. Supreme Court to review that case.

If the subsidies ultimately are struck down in states, mandates in the health law (PL 111-148, PL 111-152) requiring individuals to have health insurance and certain employers to provide it to their workers would be wiped out in those areas unless they created their own exchanges, policy analysts say.
Consumer protections guaranteeing all applicants access to insurance in the individual market and barring insurers from charging them based on their medical histories would become unworkable, analysts add. The uninsurance rate would be far higher than it otherwise would.

The Justice Department petition for a rehearing en banc asserts "Congress intended an exchange to operate effectively in each state and gave each state a real choice whether to create that exchange itself; it did not deny tax credits to individuals who need them in states that opted to have HHS set up their exchanges."

"If I were them I would want to get the D.C. Circuit decision disposed of as quickly as possible because Carvin has filed for a cert petition and he can right now argue there's a circuit split," Jost said of the Justice Department attorneys. If the court grants en banc review, it will vacate the decision of the panel, he said.

"If that happens, there's no circuit split," Jost said. "The Supreme Court almost never grants cert in the absence of a circuit split of a decision upholding [a] federal rule."

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