One set of cases, including Halbig v. Burwell pending in the U.S. Court of Appeals for the D.C. Circuit, challenges the legality of an IRS rule authorizing tax credits for the purchase of health insurance in federal exchanges. A decision in Halbig is expected shortly, as is a decision in a parallel case pending in the U.S. Court of Appeals for the Fourth Circuit (King v. Burwell). Two other cases are pending in federal district courts in Indiana and Oklahoma.
In brief, these cases claim the IRS has exceeded its statutory authority in authorizing tax credits and cost-sharing subsidies on federal exchanges because the PPACA only authorizes tax credits for the purchase of insurance on an exchange “established by the State under Section 1311.” Section 1311 instructs states to create exchanges. Federal exchanges are established under Section 1321 of the Act.
At one level these cases present a straightforward statutory interpretation question. The text is clear and does not contradict any other provisions in the Act. That would seem to settle the matter. On the other hand, the PPACA is a complicated and poorly drafted statute and, because over 30 states refused to set up their own exchanges, invalidation of the IRS rule could have a significant effect on its implementation. So the federal government has pushed back hard and has sought to argue that what the statute says cannot be what it means.
For a more in-depth discussion of the legal issues, see this law review article I co-authored with Michael Cannon. This research is credited (blamed?) for spurring the tax-credit litigation. For more on that, see this post explaining how this research led to several lawsuits.
For some recent commentary on the case, see these posts from James Blumstein, Patterico, Jonathan Turley and TPM. Here’s my post critiquing the district court decision siding with the federal government and another post on the potential implications of recent Supreme Court decisions for the issues in these cases. For both sides of the controversy, here’s a link to my debate with Nicholas Bagley. Pre-2014 VC posts on these issues can be found here.
For even more, see this reference guide to Halbig and its companion cases.