News Feature | October 8, 2014

Oklahoma Judge Rules Against ACA Subsidies

Christine Kern

By Christine Kern, contributing writer

ACA Subsidies Ruling Oklahoma

Ruling helps move issue closer to Supreme Court.

In a significant legal setback for the Obama administration, a federal judge in Oklahoma has ruled people in states that rely on the federal insurance exchange are not eligible for Obamacare premium subsidies to help them pay for coverage, according to Scribd.

U.S. District Judge Ronald White found the Internal Revenue Service rule issued by the Obama administration to set up tax-credit subsidies to help people afford insurance premiums under the ACA was "an invalid implementation" of the law based on his interpretation of it. “The court holds that the IRS rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law,” White wrote.

In his ruling, White rejected the administration's argument that striking down the subsidies would cripple the entire healthcare reform law. “Congress is free to amend the ACA to provide for tax credits in both state and federal exchanges, if that is the legislative will,” he wrote. White put his ruling on hold pending an expected appeal by the administration, which means subsidies will continue to be available in Oklahoma.

The Oklahoma court is the first U.S. District Court to rule that the language of the Affordable Care Act does not allow subsidies in states that have not established their own marketplaces. The issue of whether the subsidies are legal is being fought in several courts across the country and could end up being decided by the U.S. Supreme Court.

The outcome of the legal challenge will determine whether the subsidies will be available in all 50 states or only in some. Without the subsidies in the 36 states that use the federal exchange, millions of people likely would lose their coverage and the law's insurance reforms would unravel.

Modern Healthcare notes in July, a split decision in Halbig v. Burwell from a three-judge panel from the U.S. Court of Appeals for the District of Columbia Circuit also struck down the subsidies. That decision was invalidated when the full D.C. Circuit Court agreed to reconsider the case. Oral arguments are scheduled for Dec. 17.

On the same day the D.C. panel ruled against the administration in Halbig, a 4th U.S. Circuit Court of Appeals panel ruled unanimously in favor of the administration on the same issue in King v. Burwell. That case has been appealed to the Supreme Court, but the justices have not indicated whether they will take it up.