New Questions on Health Law as Rulings on Subsidies Differ

WASHINGTON — Two federal appeals court panels issued conflicting rulings Tuesday on whether the government could subsidize health insurance premiums for millions of Americans, raising yet more questions about the future of the health care law four years after it was signed by President Obama.

The contradictory rulings will apparently have no immediate impact on consumers. But they could inject uncertainty, confusion and turmoil into health insurance markets as the administration firms up plans for another open enrollment season starting in November.

By a vote of 2 to 1, a panel of the United States Court of Appeals for the District of Columbia Circuit struck down a regulation issued by the Internal Revenue Service that authorizes the payment of premium subsidies in states that rely on the federal insurance exchange.

If it stands, the ruling could cut off financial assistance for more than 4.5 million people who were found eligible for subsidized insurance in the federal exchange, or marketplace. It could also undercut enforcement of the requirement for most Americans to have insurance and the requirement for larger employers to offer it to their full-time employees.

The Justice Department said the government would continue paying subsidies to insurance companies on behalf of consumers in the 36 states that use the federal exchange, pending further review of the issue by federal courts.

Critics of the law, who said the ruling in Washington vindicated their opposition to it, did not have much time to celebrate. Within hours, a unanimous three-judge panel of the United States Court of Appeals for the Fourth Circuit, in Richmond, Va., issued a ruling that came to the opposite conclusion.

The Fourth Circuit panel upheld the subsidies, saying the I.R.S. rule was “a permissible exercise of the agency’s discretion.”

The language of the Affordable Care Act on this point is “ambiguous and subject to multiple interpretations,” the Fourth Circuit panel said, so it gave deference to the tax agency.

In a separate case, the Justice Department informed a federal appeals court in Denver on Tuesday that the Obama administration would issue new rules within a month revising a compromise on contraceptive coverage under the health care law in response to a recent Supreme Court ruling.

The court ruled this month that Wheaton College, a Christian college in Illinois, did not have to fill out certain forms that would result in birth control being provided by insurers. The administration is studying options for ensuring that women still receive the coverage. The court suggested that Wheaton could notify the government of its religious objections rather than send the opt-out forms to insurers.

Subsidies, in the form of tax credits, are a major element of the health care law. Without them, many more consumers would be unable to afford coverage and could be exempted from the “individual mandate” to have insurance.

The employer mandate is enforced through penalties imposed on employers if any of their workers receive subsidies, so it could become meaningless in states where subsidies were unavailable.

The White House rejected the ruling of the appeals court panel in Washington and indicated that the Justice Department would ask the full court to review it. The Obama administration has consistently underestimated court challenges to the health care law, including one decided in 2012 by the Supreme Court, which upheld the individual mandate.

At least two other cases on subsidies are pending in federal district courts, in Oklahoma and Indiana.

In the case decided in Washington on Tuesday, Halbig v. Burwell, the appeals court panel said that the Affordable Care Act made subsidies available only to people who obtained insurance through exchanges established by states.

The law “does not authorize the I.R.S. to provide tax credits for insurance purchased on federal exchanges,” the panel said. The law, it said, “plainly makes subsidies available only on exchanges established by states.”

Aides to Mr. Obama said the ruling seemed to fly in the face of common sense.

“You don’t need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health care costs, regardless of whether it was state officials or federal officials who were running the marketplace,” said Josh Earnest, the White House press secretary. “I think that is a pretty clear intent of the congressional law.”

Reacting to the ruling, a Justice Department spokeswoman, Emily Pierce, said, “We believe that this decision is incorrect, inconsistent with congressional intent, different from previous rulings and at odds with the goal of the law.”

Under this ruling, many people could see their share of premiums increase sharply. Subsidies reduced the average premium to $82 a month from $346, according to the administration.

The majority opinion in the case here was written by Judge Thomas B. Griffith, who was appointed by President George W. Bush, with a concurring opinion by Judge A. Raymond Randolph, a senior circuit judge, who was appointed by the elder President George Bush.

“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,” Judge Griffith said. “But, high as those stakes are, the principle of legislative supremacy that guides us is higher still.”

Another member of the appeals court panel, Judge Harry T. Edwards, a senior circuit judge appointed by President Jimmy Carter, filed a dissent in which he described the lawsuit as an “attempt to gut” the law. The majority opinion, he said, “defies the will of Congress.” He said that the Obama administration’s reading of the law was “permissible and reasonable, and, therefore, entitled to deference.”

A similar approach was taken by the Fourth Circuit panel in its case, King v. Burwell. Judge Roger L. Gregory, who received a recess appointment from President Bill Clinton and a permanent appointment from President George W. Bush, said that the rival interpretations of the law by the plaintiffs and by the Obama administration appeared to be “equally plausible.”

But, Judge Gregory said, the administration’s position helps achieve “the broad policy goals” of the Affordable Care Act. “The economic framework supporting the act would crumble if the credits were unavailable on federal exchanges,” he said.

In a concurring opinion, Judge Andre M. Davis, a senior judge on the appeals court, said the plaintiffs’ argument “would effectively destroy the statute.” It would, he said, “deny to millions of Americans desperately needed health insurance through a tortured, nonsensical construction” of the law. Judge Davis and the other judge on the panel, Stephanie D. Thacker, were appointed by Mr. Obama.

The health law authorized subsidies specifically for insurance bought “through an exchange established by the state.”

When the law was adopted, Mr. Obama and congressional Democrats assumed that states would set up their own exchanges. But many Republican governors and state legislators balked, and opposition to the law became a rallying cry for the party.

The lawsuit in Washington, championed by conservative and libertarian groups, was filed by people in states that use the federal exchange: Tennessee, Texas, Virginia and West Virginia. They objected to being required to buy insurance, even with subsidies to help defray the cost.

One of the plaintiffs, David Klemencic, who has a carpet store in Ellenboro, W.Va., said: “If I have to start paying out for health insurance, it will put me out of business. As Americans, we should be able to make our own decisions in matters like this.”

Democrats said the Fourth Circuit ruling validated the law, which they passed in 2010 without any Republican votes. Representative Nancy Pelosi of California, the House Democratic leader, said the plaintiffs’ reading of the law was “obviously false.”

By contrast, Speaker John A. Boehner praised the ruling of the appeals court panel in Washington. It showed, he said, that “President Obama’s health care law is completely unworkable.”