The Affordable Care Act survived disastrous website launches and the Hobby Lobby decision, but now faces an uncertain future over state health care subsidies.
The D.C. Circuit Court of Appeals is expected to decide as early as this week the outcome of Halbig v. Burwell, a lawsuit arguing that tax credits for low- and middle-income applicants should only be available in states that established their own health care exchanges. Similar cases were filed in 2011 and 2013, but in both, according Royal Oakes of the Life, Health and Disability Insurance Blog,
the plaintiffs argue[d] that the IRS decision to include the federal exchanges in the subsidy program improperly exposes employers in states that have declined to establish their own public exchanges to penalties from which they otherwise would have been shielded.
For employers in the 36 states without an exclusively state-run exchanges, they’ll be penalized if they don’t offer sufficient coverage and any full-time employee receives subsides on the federal exchange.
The case comes from a poorly-worded provision in the ACA, according to employment benefits lawyer Alden Bianchi for Employment Matters.
Section 1401 of the Affordable Care Act provides that eligible taxpayers may receive income tax credits for purchase of insurance “through an Exchange established by the State under [Act Section 1311]” … Section 1311 is the provision of the Act that enables the states to establish health insurance exchanges. That provision does not refer to federally-facilitated exchanges.
When it came to semantics, the D.C. District Court decided in favor of the government in January 2014 and dismissed the suit. They essentially side with the IRS’ argument that Congress did not intend to limit tax credits to state exchanges and the wording was only an error. The D.C. Circuit Court may not be as forgiving, however, because of how the judges are politically split, according to Rick Ungar in an opinion article for Forbes.
[T]wo members of the three judge panel hearing the case appeared, in oral arguments, to have considerable sympathy for the anti-Obamacare point of view.
Judge A. Raymond Randolph and Judge Thomas Griffith were both appointed under either of the Bush administrations.
While this case has not received as much media attention as the Hobby Lobby decision, there are already worries that a ruling against the subsidies will destabilize Obamacare.
Unlike the Hobby Lobby decision, this one does have the ability to harm the ACA’s current standing, according to Oaks.
Legal experts have warned that a ruling against the government would hinder the government’s ability to enforce minimum coverage requirements for employers and individuals in states that refuse to establish insurance exchanges and essentially, will cut-off access to subsidized coverage for lower-income, uninsured adults in those states.
It could also delay the collection of employer mandated taxes.
While a ruling may ultimately harm the subsidies received by nearly 7 million people on the federal exchange, an anti-ACA decision will likely lead to an 11-member appeals court review before any immediate change is seen in insurance.