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Obamacare and Premium Subsidies

July 22, 2014 was a rollercoaster of a day for the Patient Protection and Affordable Care Act (ACA)! In the morning, the U.S. Court of Appeals for the District of Columbia ruled 2-1 in Halbig v. Burwell that §36B of the ACA restricts premium subsidies to insurance exchanges run by states and does not authorize those subsidies for insurance exchanges run by the federal government. In the afternoon, the Fourth Circuit Court of Appeals ruled 3-0 in King v. Burwell that premium subsidies are allowed for both state-run and federal-run insurance exchanges.

The differing interpretations mean life or death for the ACA. The ACA provides that taxpayers whose income is 100% – 400% of the poverty line are eligible for premium subsidies when purchasing health insurance from an exchange. The Act also provides that states may set up and run their own exchanges or they may use a federally established and managed exchange. To date: 14 states run their own exchanges; 36 states use the federally run exchange; 8+ million individuals have reportedly purchased insurance through state and federal exchanges; 5.45 million of those people reportedly signed up through the federal exchange and 5.18 million of them applied for premium subsidies.

If the first court’s decision that §36B of the ACA does not authorize subsidies for the federal exchange is ultimately upheld, the financial support for millions of insured disappears and they will probably be unable to afford the insurance premiums. If, on the other hand, the second court’s decision that subsidies are authorized for state and federal exchanges is ultimately upheld, the subsidies will continue for all and enrollments – projected to total 12 million people by the end of 2014 – will continue.

If anti-ACA forces are rejoicing and pro-ACA forces are mourning, they are doing so prematurely. The first panel voting 2-1 against subsidies for the federal exchange split along party lines: 2 Republican appointees against the subsidies and 1 Democratic appointee dissenting. The next probable step will be the Administration’s request for an en banc ruling by all the court’s judges, the clear majority of whom are Democrats, and the en banc ruling can overrule the first panel’s decision. Furthermore, if appeals carry the issue to the U. S. Supreme Court, the Court is expected to: read §36B in context with other ACA provisions supporting subsidies for the federal exchange; use the Chevron Rule, which states that if “the statute is silent or ambiguous with respect to the specific issue” the Court will defer to the agency’s construction of the statute, so long as it is “permissible.” In other words, many legal experts expect the first panel’s decision to be overturned and subsidies to continue for state and federal exchanges.

Whether subsidies for the federal exchange will be upheld or struck down, the ACA had a wild ride today.

By Kathy Catanzarite


Source: Kathy Catanzarite – Handelonthelaw.com Staff Writer

Note from HandelontheLaw.com: This article is to be used as an educational guide only and should not be interpreted as a legal consultation. Readers of this article are advised to seek an attorney if a legal consultation is needed. Laws may vary by state and are subject to change, thus the accuracy of this information can not be guaranteed. Readers act on this information solely at their own risk. Neither the author, handelonthelaw.com, or any of its affiliates shall have any liability stemming from this article.