Just hours after the Affordable Care Act was dealt a serious blow from a federal appeals court, a different appeals court gave the law a victory — thanks in part to an analogy based on pizza.
The Fourth Circuit Court of Appeals in Virginia on Tuesday afternoon upheld the distribution of premium subsidies under the law through both state and federal exchanges, something that has become a point of contention in federal courts.
The argument from plaintiffs challenging Obamacare holds that the way the law was written does not allow for subsidies to be provided by the federal government, pointing to a statute that says subsidies should be issued for plans purchased “through an Exchange established by the State under Section 1311” of the Affordable Care Act. Section 1311 establishes the state-run exchanges. However, the plaintiffs argued the law does not permit subsidies in federal exchanges, according to Section 1321 of the law.
The federal government has maintained Congress’ intent in crafting the law was clear — that as many people as possible would be able to acquire affordable health insurance with subsidies provided either through a federal or state exchange.
The Virginia court’s ruling was a unanimous 3-0 decision. In a concurring opinion explaining the rationale for the ruling, Senior Fourth Circuit Judge Andre Davis explained the debate in terms of a pizza order:
If I ask for pizza from Pizza Hut for lunch but clarify that I would be fine with a pizza from Domino’s, and I then specify that I want ham and pepperoni on my pizza from Pizza Hut, my friend who returns from Domino’s with a ham and pepperoni pizza has still complied with a literal construction of my lunch order.
That is this case: Congress specified that Exchanges should be established and run by the states, but the contingency provision permits federal officials to act in place of the state when it fails to establish an Exchange. The premium tax credit calculation subprovision later specifies certain conditions regarding state-run Exchanges, but that does not mean that a literal reading of that provision somehow precludes its applicability to substitute federally-run Exchanges or erases the contingency provision out of the statute.
On the surface, it makes sense. Davis is reading Congress’ intention as asking states to establish exchanges, but saying it would be fine for the federal government to come in and run exchanges if the states fail to do so. The Internal Revenue Service later handed down a regulation in 2012 that said individuals may receive a tax credit “regardless of whether the exchange is established and operated by a state.”
Davis’ two colleagues agreed with the federal government’s arguments in court, though they applied more caveats. Judge David King wrote the “defendants have the stronger position, although only slightly.”
It’s not the first time a food analogy has been used as a legal metaphor to explain a section of Obamacare. In 2012 oral arguments before the U.S. Supreme Court, there was a famous debate over a theoretical mandate to buy broccoli.
Just hours before the Fourth Circuit handed down its opinion, the U.S. Court of Appeals for the District of Columbia Circuit essentially came to the opposite conclusion and sided with the plaintiffs in a similar case.
In a 2-1 decision, the D.C. court said the plaintiffs presented a more compelling argument than the federal government. It determined the law “unambiguously restricts the … subsidy to insurance purchased on Exchanges ‘established by the State.”
“We conclude that appellants have the better of the argument: a federal Exchange is not an ‘Exchange established by the State,’ and section 36B does not authorise the IRS to provide tax credits for insurance purchased on federal Exchanges,” the judges wrote in their decision.
The conflicting opinions could set up another high-profile challenge to Obamacare before the Supreme Court.
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