Courts issue contradictory rulings on ACA subsidies

By Greg Grisolano, Land Line staff writer | Tuesday, July 22, 2014

Two federal appeals courts issued conflicting rulings Tuesday on the legality of one of the key features of the Affordable Care Act.

At issue are two separate lawsuits challenging the legality of subsidies issued by the IRS to individuals who purchased insurance through the HealthCare.gov website or through a federally administered insurance exchange, rather than a state-run exchange.

The U.S. Court of Appeals for the District of Columbia issued a 2-1 ruling stating that the law “does not authorize the Internal Revenue Service to provide tax credits for insurance purchased on federal exchanges.” The White House is expected to request the entire 11-member Appeals court to review the decision. Read the D.C. court’s ruling here.

The D.C. court’s ruling would not repeal the Affordable Care Act, but it would affect some estimated 5 million Americans who signed up for insurance using the HealthCare.gov website or a federally administered exchange. The subsidies are designed to reduce the cost of monthly insurance premiums.

Only 14 states and the District of Columbia opted to set up their own state exchanges. The other 36 states either opted not to create their own state-administered exchanges, or partnered with the federal government on a jointly administered exchange.

Hours later, The U.S. Fourth Circuit Court of Appeals in Virginia declared the subsidies are “a permissible exercise of the agency’s discretion,” according to the court’s ruling. That court’s ruling can be found here.

Brenda Smith, of OOIDA’s medical benefits group, said the rulings will not affect plans purchased through private insurance marketplaces, such as the one OOIDA opened last fall.

“This does not affect OOIDA’s private exchange or any private exchange for that matter,” Smith said. “Private exchanges were never eligible for subsidies, so it is a non-factor for the OOIDA Member’s Health Care Exchange.”

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