'We Must Defer to the IRS Rule': Second Federal Court Rules on Obamacare Subsidies, Votes to Uphold

As Peter Suderman noted earlier, the U.S. Court of Appeals for the District of Columbia Circuit ruled today in Halbig v. Burwell that the plain text of the Patient Protection and Affordable Care Act trumps an I.R.S. rule granting insurance subsidies through the federally run health exchanges now operating in 36 states. In effect, according to the D.C. Circuit, the Obama administration is in violation of its own health care law.

Yet just a few hours later, a second federal appellate court, the U.S. Court of Appeals for the 4th Circuit, reached the opposite conclusion, ruling that while the relevant provision of the federal health care law might appear to cut against the federal government, the I.R.S. is nonetheless entitled to the benefit of the doubt from the federal courts.

"We cannot discern whether Congress intended one way or another to make the tax credits available on HHS-facilitated Exchanges. The relevant statutory sections appear to conflict with one another, yielding different possible interpretations," the 4th Circuit declared in King v. Burwell. "Confronted with the Act's ambiguity, the IRS crafted a rule ensuring the credits' broad availability and furthering the goals of the law. In the face of this permissible construction, we must defer to the IRS Rule."

We now have a circuit split on this fundamental question about the legality of the ACA, a fractured state of affairs that increases the likelihood of review by the U.S. Supreme Court. The next big question is whether the Obama administration will seek en banc review by the D.C. Circuit, which is a re-hearing of the case by a full bench of D.C. Circuit judges (in contrast to the 3-judge panel that just ruled). If that turns out to be the case, the Supreme Court will stay out of the dispute pending final resolution by the D.C. Circuit, a process that could take many months. But if it's not the case, Obamacare could be back before the high court next term.