DC Appeals Court Overturns Subsidies for Federal Exchange

Federal Appeals Court invalidates some ObamaCare subsidies, in blow to health law.




In what could be a major blow to the Affordable Care Act, a three-judge panel for the U.S. Court of Appeals in Washington ruled today that subsidies may not be offered in the federal health exchange. The decision overturned a lower court ruling.


Though the ruling is likely to be appealed, the decision threatens to gut the foundation of the law by potentially nixing subsidies that millions of people obtained through the federally run exchange known as HealthCare.gov.


The suit maintained that the language in ObamaCare actually restricts subsidies to state-run exchanges -- of which there are only 14 -- and does not authorize them to be given to the 36 states that use the federally run system, which Ohio is one of. 


Background
Through the Affordable Care Act (ACA) in 2010, the federal government asked states to establish exchanges on which to sell qualified health plans. If a state did not establish its own exchange, the federal government would do so. Section 36B of the Internal Revenue Code (IRC) states premium assistance (i.e., tax subsidies) is available to individuals “… who were enrolled … through an Exchange established by the State under 1311” of the ACA. However, in 2012, the Internal Revenue Service determined that “established by the State” also included exchanges established by the federal government.




Two appellate court cases heard arguments regarding whether the subsidies are only available on the state-based exchanges, and not available on the federally run exchanges that are used by the majority of states:

• The Court of Appeals for the DC Circuit ruled that the ACA only authorized premium tax subsidies for people who enrolled in coverage through a state-based exchange, a more literal interpretation of section 36B of the IRC.
• The Court of Appeals for the Fourth Circuit ruled to uphold the interpretation that the intent of the ACA was to provide subsidies to anyone buying qualified coverage.

What does this mean in Ohio?


In Ohio, which has a federally facilitated exchange, everything stays the same for now. Subsidies are still available to our customers.  These appellate court decisions change nothing right away.


We will continue to follow the law as additional ruling are made.


We cannot speculate at this time what the outcome will be.  We will follow the issue closely and prepare ourselves appropriately,


Because there is a conflict between the rulings of the appellate courts, the losing side of each case can choose one of two options:

1. Request an "en banc" review, which is a full review by all judges in the particular court
2. Petition the Supreme Court to hear the case (the Supreme Court will begin hearing cases again this October)