Dueling Rulings Put Obamacare Subsidies for 5 Million at Risk

Entrepreneur Staff
2 min read

Those following the Affordable Care Act’s twists and turns got another surprise today with dueling rulings from two U.S. appeals courts. At issue? An Internal Revenue Service regulation passed in conjunction with the health-care reform law that makes subsidies for health insurance available to certain middle- and low-income consumers.

In a 2-1 vote, the U.S. Court of Appeals for the District of Columbia invalidated the IRS regulation, ruling that the ACA doesn’t give the tax agency authorization to provide credits for subsidies on federal exchanges. Just two hours later, a Virginia appeals court came to the opposite conclusion, saying “we uphold the rule as a permissible exercise of the agency’s discretion.” The Obama administration said it would appeal the D.C. ruling.

Should it succeed, the D.C. ruling could put the accessibility and affordability at the cornerstone of Obamacare in jeopardy. The health-care law passed in 2010 requires most Americans to carry insurance or pay a penalty. A June report by the Department of Health and Human Services said those who qualify for tax credits have plans with premiums that cost 76 percent less, on average, than the full premium before tax credits.

Currently, only 16 states and the District of Columbia offer state exchanges. According to the HHS, 68 percent of those who chose private health plans between October and April, 5.4 million people, obtained their coverage through a federal exchange, with most qualifying for subsidies.  

If it stands, the D.C. ruling might also allow some employers to sidestep fines. Under the ACA, large employers pay tax penalties when their staffers purchase insurance on exchanges and receive federal subsidies.

The rulings are the latest for a law whose implementation has been plagued by delays and challenges. More change could still come as other courts decide the issue and the D.C. ruling is reviewed by a full appeals court.

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