One Court Ruling Shoots Down Obamacare, Another Backs It Up

Health care subsidies for millions of Americans are being threatened, but what do the two rulings mean for you?

When it comes to eligibility for health care subsidies, not everyone is on the same page (or apparently even in the same book).

A federal appeals court in Washington, D.C., has ruled that nearly 5 million Americans in 34 states who used the federal online health insurance exchange to enroll in health coverage are not eligible for billions of dollars in tax subsidies to help them afford the premiums.

Meanwhile, an appeals court in Virginia reached the opposite conclusion, saying the tax subsidies are legal, regardless of whether a federal or state exchange was used.

According to The New York Times, the U.S. Court of Appeals for the District of Columbia Circuit said that under the Affordable Care Act, known as Obamacare, only people who obtained health insurance through a state exchange are eligible for subsidies.

In fact, language in the statute says that tax credits are allowed for “health plans offered in the individual market within a state which cover the taxpayer, the taxpayer’s spouse, or any dependent of the taxpayer and which were enrolled in through an exchange established by the state under 1311.”

Thirty-four states declined to set up their own health care exchanges, forcing their residents to use a federal marketplace to buy individual health insurance instead.

The Obama administration plans to ask the full D.C. circuit to reconsider the ruling by a three-judge panel. The Times reported:

“You don’t need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health care costs, regardless of whether it was state officials or federal officials who were running the marketplace,” said Josh Earnest, the White House press secretary. “I think that is a pretty clear intent of the congressional law.”

The contradictory rulings on health care subsidies could put the question in the lap of the U.S. Supreme Court.

According to NBC News, the subsidies are vital to the success of Obamacare, and the Virginia court thought so, too.

“It is … clear that widely available tax credits are essential to fulfilling the act’s primary goals and that Congress was aware of their importance when drafting the bill,” the three-judge Richmond panel ruled.

“With only 16 state-run exchanges currently in place, the economic framework supporting the act would crumble if the credits were unavailable on federal exchanges.”

Right now nothing will change. About 6.7 million Americans will receive tax credits to help them pay their premiums for insurance purchased through the online exchanges, NBC said. About 4.7 million or (70 percent) of those people used a federal exchange.

Here’s what you should know about the recent Obamacare rulings:

  • How does it affect me now? It doesn’t. Because appeals of the rulings seem certain, nothing will change for the foreseeable future. “It’s important for people all across the country to understand that this ruling does not have any practical impact on their ability to continue to receive tax credits right now,” Earnest said.
  • Potential impact. “A ruling that threatens to strip insurance subsidies from millions of Americans is the most significant threat to Obamacare since it overcame the challenge to its constitutionality in the U.S. Supreme Court in 2012,” Time said. Without subsidies, insurance premiums would soar for many Americans, making it unaffordable, and destabilizing the future of the exchanges.
  • Which states have their own health exchanges? They are: California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont and Washington, as well as the District of Columbia.

What do you think about the dueling court decisions? Share your thoughts below or on our Facebook page.

Stacy Johnson

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  • Jason

    This will go to the US Supreme Court and I predict that court will rule 5-4 that the subsidies only apply to state run exchanges. This will further split the USA into states that have access to medical care through the ACA and those that don’t. I suspect that the states that expanded medicaid will also set up an exchange. People that live in states that don’t expand medicaid or set up an exchange will just be out of luck. This case will not remove the requirement to have insurance or penalties for those that don’t.

  • Y2KJillian

    Thank you for this timely article. I heard about this on the radio (NPR) yesterday, and wasn’t exactly sure what they meant–it went a bit fast and I was doing something else when I heard it in the background. I was quite worried–part of our current retirement plan is that next year we sign up for WA state ACA…but it looks like so far, WA state ACA is A-OK. Whew!

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