A three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled 2-1 that the IRS went too far in extending subsidies to individuals who buy insurance through federally run insurance exchanges, potentially eliminating subsidies that millions of Americans are depending upon in order to afford health insurance.

Fox News is reporting on the panel's ruling, which threatens to "gut the foundation of the law" by eliminating lucrative subsidies that are making health insurance affordable to lower and middle class families. The basis of the ruling is the language of the Affordable Care Act itself, which clearly states that subsidies are available only through state-run exchanges.

The problem is that only 14 states have these exchanges with the majority of the country - 36 states - using a federally run system that was originally meant to be a fall back position. But when so many state governors complained that their budgets could not handle the expenses of an exchange, it forced the government to rely heavily upon federally-run exchanges in order to get the program off the ground.

The Internal Revenue Service decided to extend the same subsidies to persons enrolling through the federal exchange that persons were receiving on state-run sites.

The three-judge panel decided that the IRS cannot do this because the language in the law clearly limits these subsidies to state-run exchanges.

“We reach this conclusion, frankly, with reluctance," the judges wrote in their decision. "At least until states that wish to can set up Exchanges, 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.”

The case, Halbig v. Burwell, is considered to be one of the first major legal challenges to the law since the constitutionality of the individual mandate was brought before the U.S. Supreme Court.

"The ruling, though likely to be appealed, could threaten the entire foundation of the newly devised health care system," Fox reports.

"Nearly 90 percent of the federal exchange’s insurance enrollees were eligible for subsidies because of low or moderate incomes, and the outcome of the case could potentially leave millions without affordable health insurance."

The Obama administration is expected to request a ruling by the full court, known as an en banc ruling, which is the only way that a court can overrule a decision made by a panel of its own judges.

Some court watchers believe that because of the political makeup of the court - seven of the 11 judges sitting on the court are Democrats - that they will reverse the panel's ruling, thus sending the case to the U.S. Supreme Court.

© All Rights Reserved, Living His Life Abundantly®/Women of Grace®  http://www.womenofgrace.com