Appeals court nixes subsidies for HHS exchange users

PPACA implements some health insurance requirements, such as the community rating requirements, by making changes to the federal Public Health Services Act. HHS last week decided that, because the territories are not going to receive full PPACA expansion funding, the Public Health Services Act excludes territories from its definition of "state," and the PPACA insurance requirements seem to be destabilizing the territories' health insurance markets, the territories can be exempt from the PPACA rules that were set by changing the Public Health Services Act.

Griffith wrote his opinion before HHS exempted the territories from the PPACA provisions that changed the Public Health Services Act. He cites an HHS refusal to exempt the territories from the PPACA underwriting requirements as a justification for the possibility that Congress could have imposed those requirements on some states without providing coverage expansion funding for those states.

A. Raymond Randolph, a senior circuit judge, concurred in the Griffith opinion. He argued that a court has no power to help the government fill in accidental gaps in statutes. Harry Edwards, another senior circuit judge, called the majority opinion a "not-so-veiled attempt to gut the Patient Protection and Affordable Care Act."

In a 1984 ruling on Chevron U.S.A. Inc. vs. Natural Resources Defense Council Inc., the U.S. Supreme Court called for courts to defer to a federal agency's construction of a statute as long as the agency's construction of the statute is "permissible," Edwards writes.

The IRS interpretation of IRC Section 36B clearly squares with the intent of PPACA, given that the drafters clearly wanted the exchange QHP buyers to be able to get subsidies, Edwards says.

There is no "credible evidence that any state even considered the possibility that its taxpayers would be denied subsidies if the state opted to allow HHS to establish an exchange on its behalf," Edwards say. "The majority opinion ignores the obvious ambiguity in the statute and claims to rest on plain meaning where there is none to be found."

Steve Wojcik, a vice president at the National Business Group on Health, predicted that the Obama administration will appeal the ruling. His group is still reviewing how the ruling might affect individuals and employers if the Supreme Court lets it stand as is.