Cases & Deals

Individuals and businesses prevail before D.C. Circuit in challenge to Affordable Care Act subsidies

Clients Competitive Enterprise Institute, et al.

On July 22, 2014, a divided panel of the D.C. Circuit agreed with Jones Day's individual and corporate clients that the IRS had overreached by authorizing federal subsidies for health insurance purchased through the federal health insurance Exchange, known as HealthCare.Gov. The decision, which reversed a contrary ruling by the District Court, has profound consequences for implementation of the Affordable Care Act.

Under the Affordable Care Act, federal subsidies are available to help individuals pay for health insurance that is purchased through "an Exchange established by the State." The IRS, however, promulgated a regulation extending those subsidies to insurance purchased through the federally run Exchange, which serves the 36 states that declined or failed to establish their own insurance Exchanges as contemplated by the Act. The regulation has the effect of also extending the Affordable Care Act's individual and employer mandates to many individuals and businesses in those states. Represented by Jones Day, a group of those affected parties brought suit, objecting that the IRS rule conflicted with the statutory text.

On expedited appeal given the significance of the issue, the D.C. Circuit panel majority agreed with that position, ruling that the statutory language was unambiguous and that the Government's defenses of the regulation failed. Accordingly, the court ordered that the IRS rule be vacated under the Administrative Procedure Act as contrary to law. The decision has been widely recognized as a consequential challenge to the implementation of the Affordable Care Act. Because another Court of Appeals has reached a contrary conclusion, resolution by the Supreme Court is very likely.

Halbig et al. v. Sebelius et al., No. 13-cv-00623 (D.D.C.); Halbig et al. v. Sebelius et al., No. 14-5018 (D.C. Cir.)

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