Federal appeals courts issue conflicting rulings on Obamacare subsidies

UPDATE (2 p.m. EDT): The 4th U.S. Circuit Court of Appeals said the Internal Revenue Service correctly interpreted the will of Congress in doling out Obamacare subsides, coming to the opposite conclusion of the D.C. Circuit Court. A three-judge panel issued the unanimous ruling.

After losing in the D.C. court, Obama administration officials said they would appeal to the court's full, 11-member panel. While the case plays out, Obamacare enrollees who bought insurance on the federal exchange because their states don't have their own marketplace will continue to get government assistance to pay for their coverage, officials said.

OUR EARLIER STORY: A federal appeals court has delivered a serious setback to President Barack Obama’s healthcare law, potentially eliminating subsidies for millions of enrollees the administration has championed.

A three-judge panel on the U.S. Circuit Court of Appeals for the District of Columbia ruled 2-1 that the law, as written, only allows insurance subsidies in states that have set up their own exchanges. The law’s supporters call it a typo, but the act states that many of the law’s taxes and subsidies are authorized only “through an exchange established by the state.”

The ruling invalidates an Internal Revenue Service regulation that allowed subsidies in all 50 states. Thirty-six states used the federal insurance marketplace—Healthcare.gov—and did not run their own exchanges, whether through Republican opposition or technological failures.

“We reach this conclusion, frankly, with reluctance,” Judge Thomas Griffith wrote in the majority opinion. “At least until states that wish to can set up exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal exchanges and for health insurance markets more broadly.”

If upheld under an almost certain appeal, the decision could mean premium increases for more than half of the 8 million Americans who purchased taxpayer-subsidized insurance under the law.

Declarations of victory came quickly from conservatives. Sen. Ted Cruz, R-Texas, praised the ruling as a victory for Congress, against Obama’s many executive rewrites.

“The D.C. Circuit’s decision today in Halbig v. Burwell is a repudiation of Obamacare and all the lawlessness that has come with it,” Cruz said. “The Obama administration, through the Internal Revenue Service, has attempted to dispense revenues to the states without proper congressional authorization, robbing Congress of its constitutionally provided power of the purse.”

Griffith, was appointed to the court by President George W. Bush. Judge A. Raymond Randolph, who joined in the opinion, was a George H.W. Bush appointee. And Judge Harry Edwards, an appointee of President Jimmy Carter, dissented.

The Associated Press contributed to this report.