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New Healthcare Question Mark in States Dependent on Federal Exchanges

© Krantz News Service, July 23, 2014

Health care planners and consumers in 36 states face new uncertainty in the wake of contradictory rulings by two federal appeals courts.

A key provision of the Affordable Care Act offers premium tax credits to certain people who purchase private health insurance on exchanges.

The IRS had ruled that the provision applies to recipients in states that did not set up their own exchanges, but instead rely on federally-run exchanges.

A three-judge panel of the United States Court of Appeals for the District of Columbia Circuit vacated the IRS regulation.

The D.C. Circuit stated, "On its face, this provision authorizes tax credits for insurance purchased on an Exchange established by one of the fifty states or the District of Columbia. See 42 U.S.C. Section 18024(d). But the Internal Revenue Service has interpreted section 36B broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government under section 1321 of the Act. See 26 C.F.R. Section 1.36B-2(a)(1) . . . Because we conclude that the ACA unambiguously restricts the section 36B subsidy to insurance purchased on Exchanges 'established by the State,' we reverse the district court and vacate the IRS's regulation." 1/

But the Fourth Circuit Court of Appeals based in Richmond, Virginia ruled differently. Eyeing the same language in the same statute, the three-judge panel found it "ambiguous and subject to multiple interpretations. Applying deference to the IRS's determination, however, we uphold the rule as a permissible exercise of the agency's discretion." 2/

The ACA had allowed states to set up their own health care exchanges, but only 14 states and the District of Columbia did so. Federal exchanges accommodate consumers in all other states.

The ACA pays for health care subsidies by giving "premium tax credits" to consumers on a sliding scale depending upon their income. The issue is whether the subsidies are permissible only in states that established exchanges. The DC circuit said yes, the 4th Circuit no.

The result is that a majority of states must once again await a U.S. Supreme Court ruling to determine the ultimate fate of billions of dollars in subsidies.

Health care officials say nothing has changed, for now, pending appeals.

Pennsylvania, for example, is one of the 36 states without its own exchange. Antoinette Kraus, the commonwealth's director of the Pennsylvania Health Access Network, issued a statement of reassurance to Pennsylvanians relying on the subsidy.

"Today's decision in Halbig v. Burwell has no immediate impact on the ability of Pennsylvanians to use premium tax credits to lower the cost of their health insurance plans purchased through the Marketplace," she stated.

"We are confident that when the D.C. Court of Appeals reviews this case en banc they will recognize, as multiple other courts -- including the 4th Circuit Court of Appeals in Virginia today -- that the clear intent of the law was that all Marketplace enrollees receive income-based financial assistance. We are optimistic that on appeal the ruling will uphold the right of all Americans to access tax credits no matter where they live." 3/

According to one report, 318,000 Pennsylvanians have benefitted from the exchange run by the federal government. 4/


1/ United States Court of Appeals for the District of Columbia Circuit,,
July 22, 2014 retrieved July 22, 2014

2/ United States Court of Appeals for the Fourth Circuit, http://pdfserver.amlaw.com/nlj/king_usca4_20140722.pdf
July 22, 2014 retrieved July 22, 2014
3/ Kraus statement posted at https://www.facebook.com/pahealthaccess/posts/828158003861600
retrieved July 22, 2014

4/ "Latest Obamacare ruling threatens Pennslyvania subsidy recipients," by David Wenner, The Patriot-News, http://www.pennlive.com/midstate/index.ssf/2014/07/obamacare_subsidies_court_ruli.html, July 22, 2014 retrieved July 22, 2014

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