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Obamacare gets second chance at federal appeals court

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WASHINGTON — The nation's second-most-powerful court will reconsider a ruling by a three-judge panel that jeopardized President Obama's health care law.

The U.S. Court of Appeals for the D.C. Circuit approved the government's request for a new hearing Thursday in a case that will determine the legality of billions of dollars in tax subsidies offered to participants in the federal health exchange.

A panel dominated by Republican appointees had struck down those subsidies in July on the same day another appeals court panel in Richmond unanimously approved them. Both cases stemmed from challenges brought by opponents of Obamacare.

The full D.C. appeals court is dominated by Democratic appointees as a result of Obama's three most recent nominations, which were whisked through the Senate under new rules prohibiting Republican filibusters. That puts the odds in the administration's favor.

The other case has been appealed to the Supreme Court, which would be inclined to hear the appeal if circuit courts issue split verdicts. Now, however, the D.C. appeals court may give a clean bill of health to Obamacare, making high court review less likely. The case will be heard in December.

More than 5 million Americans in 34 states that did not set up their own health exchanges, or online marketplaces, would be affected if the subsidies are struck down.

The legal case, filed by a coalition of states, employers and individuals, had been considered a long-shot effort to derail the Affordable Care Act, Obama's signature domestic policy achievement. Federal district judges in D.C. and Virginia previously had ruled for the government. Two similar cases remain pending in Indiana and Oklahoma.

The D.C. appeals panel had ruled that as written, the health care law allows tax credits to be offered to qualified participants only in state-run exchanges. The administration had expected most if not all states to create their own, but only 16 states did so.

The court said the IRS went too far in allowing participants in other states served by the federal exchange to qualify for billions of dollars in government assistance. The aid has helped boost enrollment figures to more than 8 million.

"We reach this conclusion, frankly, with reluctance," Judge Thomas Griffith, a Republican appointee, said. "At least until states that wish to can set up exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal exchanges and for health insurance markets more broadly."

Judge Harry Edwards, the lone Democratic appointee on the panel, dissented, calling the challenge "a not-so-veiled attempt to gut the Patient Protection and Affordable Care Act" and warning that the panel's ruling "portends disastrous consequences."

The D.C. appeals court had been one of the most conservative in the nation when Obama took office. It had four Republican and three Democratic appointees supplemented by seven senior judges working part time — six of them Republican appointees.

The Senate unanimously confirmed Obama nominee Sri Srinivasan, a former deputy solicitor general under Republican and Democratic administrations, last year after Obama's earlier choice was blocked by Republicans. But to get the last three seats on the 11-member court filled, Senate Democrats had to change the rules to block a minority of Republican senators from holding up debate.

The federal subsidies offered through the exchanges have reduced monthly insurance premiums by 76% for those who qualify, federal health officials say. The average monthly premium dropped from $346 to $82.

In 2016, an estimated 7.3 million people in the 34 states with federal exchanges would receive subsidies totaling $36 billion, according to the Urban Institute. To qualify for subsidies, participants must have incomes below 400% of the federal poverty line, or $95,400 for a family of four.

The problem for supporters of Obamacare is that a majority of states purposely did not set up health exchanges because their governors and legislatures objected to the law.

If allowed to stand, the D.C. panel's ruling would blow a major hole in the law, since tax credits or subsidies are what make the private health insurance policies offered on the exchanges affordable to most Americans without employer-sponsored insurance plans.

If the subsidies are invalidated in 34 states, then many of the tax penalties imposed on employers and individuals for non-compliance with the law also would be eliminated. Employers pay a penalty when their workers get subsidized on the exchange. Individuals get penalized if they don't buy affordable insurance, but the subsidies often are what make it affordable.

The D.C. court's decision was the second in less than a month to go against Obama administration implementation of the health care law. In June, the Supreme Court ruled that closely held corporations that object on religious grounds to offering insurance coverage for contraceptives can sidestep that rule.

The only states, along with D.C., not affected by the ruling are those that created their own health exchanges: California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington.

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