By David Morgan and Aruna Viswanatha
WASHINGTON (Reuters) - Two federal judicial panels on Tuesday delivered conflicting rulings on how the government subsidizes premiums through President Barack Obama's healthcare law, creating more uncertainty over signature legislation that has been dogged by challenges from Republicans and other conservatives.
The rulings, handed down by appeals court judges in the District of Columbia and Virginia, could lead to a new showdown over Obamacare before the U.S. Supreme Court, which in June 2012 narrowly upheld the Democratic president's healthcare insurance overhaul.
The cases deal with the federal government's ability to offer premium tax credits to people who purchase insurance through the federal insurance marketplace that serves the majority of the 8 million consumers who have signed up for private coverage for 2014.
A three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit ruled in a 2-1 decision that the Affordable Care Act allows subsidies that help pay for insurance premiums to be offered only to consumers who purchase private health plans through exchanges run by states.
The judges suspended their ruling pending an appeal by the administration. The Obama administration said it 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 provision, saying the wording of the law was too ambiguous to restrict the availability of the funds.
The U.S. Supreme Court upheld the law commonly called Obamacare 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 said closely held for-profit corporations could object to Obamacare's contraception provision on religious grounds.
Tuesday's ruling fell in line with partisan disagreements over the healthcare law, with two Republican-appointed judges ruling against the administration in the District of Columbia court and three Democratic appointed judges ruling in favor in Virginia.
Obamacare's foes in Congress welcomed the D.C. ruling as a decision that would help efforts to dismantle the law that Obama signed in 2010.
“Today’s ruling is also further proof that President Obama’s health care law is completely unworkable. It cannot be fixed," House Speaker John Boehner said in a statement.
Stock market reaction was muted, with health insurance representatives predicting that a final decision would take "months or longer" to sort out.
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. The 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.
"Obviously, 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."
Plaintiffs in the case, known as Halbig vs. Burwell, claimed that Congress did not intend to provide subsidies through federally operated marketplaces because the Affordable Care Act specifies only state-run exchanges as recipients. The plaintiffs were identified as a group of individuals and employers from states that did not establish their own marketplaces.
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.
"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," wrote the two D.C. circuit judges in the majority, Thomas Griffith and Arthur Randolph, both appointed by Republican presidents.
"To hold otherwise would be to say that enacted legislation, on its own, does not command our respect — an utterly untenable proposition," their opinion said.
The D.C. panel's dissenting judge Harry Edwards, appointed by Democratic president Jimmy Carter, said the majority's judgment "defies the will of Congress and the permissible interpretations of the agencies to whom Congress has delegated the authority to interpret and enforce the terms of the ACA."
(Additional reporting by Lawrence Hurley, Susan Cornwell and Susan Heavey in Washington and Caroline Humer and David Ingram in New York; Editing by Howard Goller and Grant McCool)