SelfInformed

August 2014


Contradicting Court Rulings on ACA Subsidies

Thursday, August 28, 2014



On July 22nd, two federal appeals courts handed down conflicting rulings on the legality of premium assistance (tax subsidy) being provided to individuals/families participating in federally facilitated exchanges. The two courts, Washington, D.C. and Virginia, offered their contradicting rulings just hours apart, leading many to believe that the Supreme Court will have to sort out the issue during the court’s next session.

The ACA provides tax credits (premium assistance) for those purchasing health insurance through an “exchange established by the state,” however since many states (36 in total) declined to establish state-based exchange marketplaces causing residences of those states to participate in the federally facilitated exchange marketplace. The IRS interpretation allowed for tax credits to be given to participants in both the individual and federally facilitated exchanges. However, strict interpretation of the legislative language would lead some to argue that premium assistance cannot be provided to those participating in the federally facilitated exchanges, potentially impacting the five million Americans who purchased plans in the federal exchange. This was the position taken by a 2-1 majority of the Washington, D.C. federal appeals court.

However, the Richmond, VA federal appeals court unanimously ruled, 3-0, that the legislative intent was to provide subsidies to encourage individuals/families to purchase health insurance within the exchange, regardless of it being run by the state or federal government.

While the contradictory rulings have no immediate impact on the ability of individuals to access tax credits, it might require the Supreme Court to step-in and definitively rule on the challenge.

 

Katie Vlietstra is the NASE Vice President for Government Relations and Public Affairs.

 

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