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Small Business Employee Benefits and HR Blog

Federal Appeals Court Challenging ACA Subsidies in 36 States

July 22, 2014
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A three-judge panel for the U.S. Court of Appeals in Washington ruled today that the federal government may not provide premium tax subsidies for people in the three dozen states using the federally-run Marketplace, HealthCare.gov.Federal_appeals_court_flickr

The decision, if it withstands appeals, would be a huge disruption to one of the Affordable Care Act's key provisions to provide low- and middle-income Americans access to affordable health insurance coverage. The Obama administration said it will appeal. 

The ruling was an appeal to a January 2014 lower court ruling that found the Affordable Care Act did intend for the tax subsidies to be available nationwide, regardless of whether people were buying coverage through a state-run Exchange or the federally-run Exchange.

However, the appeals court disagreed. According to the 2-1 ruling, the Affordable Care Act (ACA) clearly says that premium tax subsidies (aka premium tax credits) are only available to people who obtained insurance through Exchanges established by states. According to the ruling, the law "does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges."

Should the decision eventually stand, it could mean at least five million Americans would face an average premium increase of 76 percent, according to coverage by Kaiser Health News.

Circuit Judge Griffith states in the ruling, "We reach this conclusion, frankly, with reluctance. At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly."

See related news coverage on this ruling:

  • Appeals Court Strikes Down Subsidies In Federal Health Exchange [Kaiser Health News]

  • Federals Appeals Court Delivers Serious Setback To Obama Health Care Law [The Associated Press]

  • Federal Appeals Court Panel Deals Major Blow To Health Law [The Washington Post]

  • Court Rejects Some Health-Care Law Insurance Subsidies [The Wall Street Journal]

  • Court Deals Setback To Health Care Law [The New York Times]

  • Appeals court rejects key part of Obamacare [CNN]

  • Federal court invalidates some ObamaCare subsidies, separate ruling preserves them [FoxNews]

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