The muddied future of ObamaCare

Last week, two federal courts of appeals issued opinions on ObamaCare. The issue these courts confronted — whether the ObamaCare tax credit applies in states that have opted not to create their own health care exchanges — is critical for the ultimate success of ObamaCare's goal of insuring millions of uninsured Americans. Because the penalty applies to people who could afford insurance but don't get it — and because statutorily the cost of insurance is deemed to be reduced by the tax credit (if applicable) — the availability of the tax credit vastly expands the number of uninsured subject to penalty if they fail to obtain insurance. The availability of the tax credit also affects the scope of the ObamaCare employer mandate, insofar as the law penalizes large employers that fail to provide health insurance such that at least one employee enrolls in a healthcare plan for which a tax credit is available.

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The common wisdom sees the opinion of the District of Columbia Circuit — which was issued first — as a potential death knell for ObamaCare. The issuance of the Fourth Circuit opinion a few hours later was received by commentators as having reached a conclusion favorable to ObamaCare, thus in the words of many news reports, dividing the courts of appeals. In fact, the courts of appeals are not as divided as the news reports suggest. While it is true that the D.C. Circuit's opinion is far more problematic for ObamaCare and that the Fourth Circuit opinion puts the Obama administration on solid footing, in fact even the Fourth Circuit opinion paints a muddied future for ObamaCare.

Both court opinions consider the question of whether the Affordable Health Care Act statute clearly restricts tax credits to states that have created their own healthcare exchanges. The applicable law is clear: If Congress spoke clearly, then the administration's regulations cannot reach a different conclusion. Thus, if the statute clearly limits tax credits to states with state-created exchanges, then the Obama administration's regulations making the tax credit available in other states — states where the federal government has stepped in to create the exchanges — are invalid. If, on the other hand, the statute is ambiguous, then the court must defer to the administration's regulatory interpretation.

The D.C. Circuit found the statute unambiguously inconsistent with the administration's regulations. If this view prevails, then ObamaCare surely will not end up providing insurance to millions of uninsured, and indeed — because of the whittled-down applicant pool — may have financial problems providing subsidized insurance to the uninsured who voluntarily seek insurance.

The Fourth Circuit found the statute to be ambiguous. Then, finding the administration's interpretation to be reasonable, that court upheld the regulations. That finding allows the Obama administration to continue to apply ObamaCare nationally in a uniform manner.

Importantly, though, neither court found the statute unambiguously clear in favor of national application of the tax credit. Indeed, really only one of the six appellate judges — a concurring judge on the Fourth Circuit panel — as much as suggested that the statute unambiguously said what the administration's regulations say.

The Fourth Circuit's conclusion that the statute is ambiguous means that the Obama administration's regulations stand. But it also means that another administration — perhaps one with a Republican president — could issue new regulations that restricted the tax credit to states with state-created exchanges. In other words, even the Fourth Circuit opinion that commentators view as friendly to ObamaCare leaves future administrations the freedom to undermine ObamaCare. Put another way, while the D.C. Circuit opinion is an immediate problem for ObamaCare today, the Fourth Circuit opinion leaves ObamaCare with an uncertain tomorrow.

Nash is a professor at Emory University School of Law. He studies and teaches in the areas of courts and judges, and legislation and regulation. Follow him @JonathanRNash