Appeals Courts Split on Legality of ACA Premium Tax Subsidies

Written by: PeopleKeep Team
Originally published on July 23, 2014. Last updated August 14, 2019.

Yesterday, two U.S. Appeals Courts issued conflicting rulings on the legality of the Affordable Care Act's premium tax subsidies in the federally-run Marketplace, Here's an overview of the two court rulings, and what this means for those receiving premium tax subsidies.tax_credits_holding_up_in_court

Two Conflicting Court Rulings on the Premium Tax Subsidies

On July 22nd two conflicting court rulings came out on the legality of the ACA's premium tax subsidies.

First, the U.S. Court of Appeals for the District of Columbia Circuit ruled in a 2-1 decision (Halbig v. Burwell) that the Internal Revenue Service (IRS) lacked the authority to allow subsidies to be provided in Exchanges not run by the states. Currently, 36 states are using the federally-run Exchange ( At least 5 million Americans purchased health insurance coverage during the first open enrollment period through and are receiving premium tax credits. The Obama administration says it will appeal this decision.

In a second ruling, a three-judge panel for the Fourth Circuit Court of Appeals in Richmond, VA ruled exactly the other way. The panel ruled in King v. Burwell that Congress always intended to allow subsidies to be provided in both the state- and federally-run Exchanges. 

Similar cases are pending in lower courts elsewhere around the country including Oklahoma and Indiana, but the decision by the District of Columbia court is the first to suggest that subsidies being offered in the federal Marketplace might be deemed invalid.

What This Means for Those Receiving Premium Tax Subsidies

The rulings do not impact the premium tax subsidies immediately, and clients or consumers getting premium tax subsidies should know that the tax credits are still available. 

If you are in a state with a state-run Exchange, there is no impact as the rulings are challenging the legality of the premium tax subsidies through the federally-run Exchange only. The states who currently have a state-based Exchange are California, Colorado, Connecticut, Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New York, Oregon, Rhode Island, Vermont, Washington, and the District of Columbia. Idaho and New Mexico intend to switch from the federally-run Exchange to a state-run Exchange by the 2015 open enrollment period starting in November.

If you are in a state using the federally-run Exchange, the subsidies will likely stay in place until a final legal decision is made on the matter. According to Kaiser Health News, Justice Department officials plan to seek an en banc review from the D.C. Appeals Court, meaning that the panel’s full contingent of 11 judges would hear the case. The full panel is dominated by judges appointed by Democrats, 7-4. Eventually, the case could be considered by the Supreme Court.

Kaiser Health News has put together a Q&A on the recent rulings. See: Brief Consumer Guide To Health Law Court Decisions [KHN].

What questions do you have about the recent rulings?


Image credit: Flickr, steakpinball

Originally published on July 23, 2014. Last updated August 14, 2019.


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