The U.S. Court of Appeals for the Fourth Circuit upheld a federal regulations that implemented subsidies that are vital to President Barack Obama’s healthcare overhaul, in direct conflict with another ruling on the issue handed down earlier on Tuesday.

A three-judge panel unanimously said the law was ambiguous, and that it would defer to the IRS’s determination that subsidies could go to individuals who purchased health insurance on both federal and state-run exchanges.

A separate panel from a federal appeals court in Washington on Tuesday morning said the IRS could not offer premium tax credits to people who purchase insurance through the federal insurance marketplace that serves most of the 8 million consumers who have signed up for private coverage for 2014.

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Fed Appeals Court Panel Says Most Obamacare Subsidies Illegal
If decision upheld, insurance rates for people who lose subsidies would dramatically rise

Dan Mangan
CNBC
July 22, 2014

In a potentially crippling blow to Obamacare, a top federal appeals court Tuesday said that billions of dollars worth of government subsidies that helped 4.7 million people buy insurance on HealthCare.gov are not legal under the Affordable Care Act.

In its decision, a three-judge panel said that such subsidies can be granted only to people who bought insurance in an Obamacare exchange run by an individual state or the District of Columbia — not on the federally run exchange HealthCare.gov. Plaintiffs in the case known as Halbig v. Burwell argued that the ACA, as written, only allows that often-significant financial aid to be issued to people who bought insurance on a marketplace set up by a state.

The decision is certain to be challenged by the Obama Administration, and does not immediately have the effect of law. But if it is ultimately upheld, it would cause insurance rates for those people who lost the subsidies to dramatically rise.

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