Dueling Obamacare Decisions: The Law Must Trump Bureaucracy

Today’s Halbig v. Burwell decision at the U.S. Court of Appeals for the D.C. Circuit represents a massive rebuke of the Obama Administration’s interpretation of the Affordable Care Act (ACA) or “Obamacare.”

Keep in mind that this is the same Administration that has seen its attempts to expand executive power rejected unanimously on 12 separate occasions by the Supreme Court.

Now another federal court has ruled that Obama’s Administration has gone too far. The court stated that the IRS does not have legal authority to provide tax credits to nearly 5 million people who have attempted to purchase health insurance through the federal government’s exchanges at HealthCare.gov. The impact to taxpayers is significant, as the cost of these credits could amount to more than $36 billion through 2016 (according to a study by the Urban Institute and the Robert Wood Johnson Foundation).

To some, that might seem to be a “dog bites man” story – after all, the federal government makes approximately $100 billion in improper payments each and every year. But while these improper payments stem from unacceptably high levels of waste, fraud and abuse, in the matter ruled on in Halbig the illegal subsidies occur due to open disregard for the law of the land.

This is a disregard the Administration doubled down on today, stating it intends to ignore the DC Circuit Court ruling and continue to allow the subsidies to flow, continuing to cost taxpayers billions.

And here the term “subsidies” is appropriate. Some tax credits simply allow people and companies to reduce their liabilities to the IRS. But these “premium tax credits” are a different breed because they're refundable -- meaning they can more than wipe out the beneficiary's tax bill and cover all the cost of providing the insurance.

That means the refundable portion effectively amounts to deficit spending by the government, not just foregone revenues. Future taxpayers are being stuck with cost.

That despite the fact the ACA clearly and repeatedly states that subsidies can be obtained by individuals who purchase insurance “through an Exchange established by the State.”

Similar language appears or is referenced nine times in the ACA. For those who purchase insurance through federally established exchanges, there are no benefits provided for in the law.

But that has, to date, not stopped Obama’s IRS from providing tax benefits to individuals in the 36 states where there is no state-created exchange – and this is where taxpayers could continue to suffer billions of dollars of losses. 

The D.C. Circuit Court ruling was a big one for taxpayers, but the legal battle will certainly continue for some time. Just hours after the decision was issued, the U.S. Circuit Court of Appeals also ruled on the matter. This court found the law's legislative language to be ambiguous and thus, allowed the IRS to exercise its own discretion.

The dueling decisions mean the U.S. Supreme Court will likely make a final judgment on the matter, but there's no doubt that Halbig has put a chill on feverish claims that the IRS can essentially construct its own statutory powers by pulling words out of thin air and issuing regulatory edicts.