Another Federal Judge Rules Against Obamacare, And It Could Set Up A Supreme Court Showdown

A federal judge in Oklahoma has struck down an IRS regulation that provides subsidies under the Affordable Care Act, giving more ammunition to challengers aiming to deal a potentially crippling blow to the law known as Obamacare.

At issue in a number of legal challenges around the US is whether the Affordable Care Act allows for the federal government to provide subsidies to individuals buying health insurance on the federal exchange. U.S. District Judge Ronald White ruled that subsidies provided through the federal exchange are invalid.

"The court holds that the IRS Rule is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law ... in excess of statutory jurisdiction, authority, or limitations, or short of statutory right ... or otherwise is an invalid implementation of the ACA," White wrote.

The Oklahoma judge's ruling in the case, brought by Oklahoma Attorney General Scott Pruitt, agrees with one handed down by a three-judge panel on the US Court of Appeals for the District of Columbia in July. The Obama administration appealed that ruling, and the full bench of the appeals court will review the case. The Fourth Circuit Court of Appeals' ruling in a similar case backed the Obama administration.

White stayed his ruling pending appeal, meaning that Obamacare subsidies from federal exchanges will keep flowing. The Obama administration plans to appeal the decision to the 10th Circuit Court of Appeals.

"The district judge in the Oklahoma case made a decision that is inconsistent with the text of the statute, the clear intent of Congress, common sense, and the Fourth Circuit panel's unanimous contrary ruling on the same issue," a Department of Justice spokesperson told Business Insider.

The plaintiffs in the various cases across the country argue the way the law was written does not allow for subsidies to be provided by the federal government, pointing to a statute that says subsidies should be issued to plans purchased "through an Exchange established by the State under Section 1311" of the Affordable Care Act. Section 1311 of the law establishes the state-run exchanges. But plaintiffs say the law does not permit subsidies in federal exchanges, according to Section 1321 of the law.

Supporters of the challengers said White's ruling on Tuesday will make it more likely the Supreme Court will have to step in to resolve the issue.

"It's certainly reassuring to see another court take the text of the statute seriously," said Jonathan Adler, a law professor at Case Western Reserve University in Ohio and a conservative legal scholar behind the Halbig challenge.

"That another court reaches this result shows that even if the DC Circuit reverses Halbig, that will not resolve the underlying dispute. This decision likely makes eventual Supreme Court review more likely."