(Adds analysis, political and insurance industry reaction)
By David Morgan and Aruna Viswanatha
WASHINGTON, July 22 (Reuters) - Two U.S. judicial panels on Tuesday injected new uncertainty into the future of President Barack Obama’s healthcare law, with conflicting rulings over whether the federal government can subsidize health insurance for millions of Americans.
The appeals court rulings, handed down by three-judge panels in Washington, D.C., and Richmond, Virginia, augured a possible rematch before the U.S. Supreme Court, which in June 2012 narrowly upheld the Democratic president’s 2010 healthcare overhaul.
The twin rulings fell in line with partisan disagreements over healthcare reform, with two judges appointed by Republican presidents deciding against the administration in the District of Columbia and three judges appointed by Democrats ruling in favor in Virginia.
The rulings also reignited the debate over Obamacare on Capitol Hill and on the campaign trail to November congressional elections. Republican opponents of the law welcomed the D.C. decision as a further step toward dismantling Obama’s signature domestic policy.
The cases deal with the government’s ability to offer premium tax credits to people who purchase private coverage through the federal insurance marketplace that serves the majority of the 8 million consumers who signed up for 2014.
The U.S. Court of Appeals for the District of Columbia Circuit ruled in a 2-1 decision that the language in the Affordable Care Act dealing with subsidies shows they should only be provided to consumers who purchase benefits on exchanges run by individual states.
Most states including Florida and Texas, which have some of the largest uninsured populations, opted to leave the task of operating a marketplace to the federal government.
But plaintiffs in the D.C. Circuit case, known as Halbig v. Burwell, claimed that Congress did not intend to provide subsidies through federally operated marketplaces. The plaintiffs were identified as a group of individuals and employers from states that did not establish their own marketplaces.
The D.C. Circuit judges suspended their ruling pending an appeal by the administration. Administration officials said they would appeal to the full circuit court, a process that could take up to six months, and stressed the ruling would have no impact on consumers receiving monthly subsidies now.
Hours later, a three-judge panel of the 4th U.S. Circuit Court of Appeals in Virginia ruled unanimously to uphold the same provision in the case of King v. Burwell, saying the wording of the law was too ambiguous to restrict the availability of federal funds.
The appearance of a split between separate circuit courts over the question of Obamacare subsidies could increase the chance of Supreme Court intervention. But legal experts and some Republicans on Capitol Hill said the full D.C. Circuit court, dominated by appointees of Democratic presidents, was likely to overturn its panel’s ruling or at least revisit it.
The Supreme Court upheld the Obamacare law on constitutional grounds in 2012 but allowed states to opt out of a major provision involving Medicaid coverage. Last month, the high court’s conservative majority ruled again on the law, saying closely held for-profit corporations could object to Obamacare’s contraception provision on religious grounds.
“Today’s ruling is also further proof that President Obama’s healthcare law is completely unworkable. It cannot be fixed,” House Speaker John Boehner said in a statement.
Obamacare advocates welcomed the Virginia ruling, which House Democratic leader Nancy Pelosi said “affirms the intent of the Affordable Care Act: to make quality, affordable health insurance available to every American in every state.”
Outside the political sphere, stock market reaction to the rulings was muted for health insurers like WellPoint Inc and Aetna Inc, which sell plans on many Obamacare exchanges. Industry officials predicted that a final decision would take “months or longer” to sort out, with no immediate impact expected on their business.
“In the meantime, health plans remain focused on ensuring stability, affordability and accessibility for consumers,” said Brendan Buck, spokesman for America’s Health Insurance Plans, a main lobbying and trade group.
Analysts estimate that as many as five million people could be affected if subsidies disappear from the federal marketplace, which serves 36 states through the website HealthCare.gov. Subsidies are available to people with annual incomes of up to 400 percent of the federal poverty level, or $94,200 for a family of four.
“This has got probably more rounds of appeals and so forth, so nothing is going to really happen right now,” said John Holahan of the nonpartisan Urban Institute.
“Some states may jump into action to set up their own exchanges to qualify as state-based exchanges,” Holahan added. “Others won‘t, in which case there will be a large number of uninsured that will remain and possibly grow.”
The two-judge majority in the D.C. Circuit case, judges Thomas Griffith and Arthur Randolph, wrote: “The fact is that the legislative record provides little indication one way or the other of congressional intent, but the statutory text does. (It) plainly makes subsidies available only on exchanges established by states. And in the absence of any contrary indications, that text is conclusive evidence of Congress’s intent.”
The D.C. panel’s dissenting judge Harry Edwards, appointed by Democratic president Jimmy Carter, wrote the majority’s judgment defied the will of Congress and ignored the authority Congress vested in agencies to interpret and enforce the healthcare law.
The Virginia appeals court, while siding with the administration, was lukewarm in its support, saying: “The court is of the opinion that the defendants have the stronger position, although only slightly.” (Additional reporting by Lawrence Hurley, Susan Cornwell, Susan Heavey, Julia Edwards and Emily Stephenson in Washington; and by Caroline Humer and David Ingram in New York; Editing by Michele Gershberg, Howard Goller and Grant McCool)