ACA Insurance Subsidies Struck Down by D.C. Appeals Court
- By BSTQ Staff
A federal appeals court has struck down subsidies provided under the Affordable Care Act (ACA) for federally run insurance exchanges. According to the three-judge panel, the law forbids income-tax subsidies for low- and middle-income Americans who use one of the federally run insurance exchanges based on a 2012 interpretation of the law by the Internal Revenue Service (IRS). If upheld, it could end insurance subsidies in as many as 36 states. However, the Justice Department will file for an en banc review of the decision either to the D.C. Circuit Court or directly to the Supreme Court, which will trigger an automatic stay because the ruling cannot have legal force until after the full panel of the Circuit Court has a chance to reconsider the case.
The text of the ACA says the sliding-scale tax credits are only available for coverage purchased “through an exchange established by the state,” which only 16 states have established. IRS officials claim that the imprecise wording of the law contradicted Congress’ overall intent to expand insurance coverage as widely as possible. But, the IRS argument did not sway the appeals court. “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 regulation,” the two-member majority wrote.
Nearly seven million people used the exchanges to buy coverage in 2014, and more than 80 percent of them qualified for a tax credit that averaged about $2,900 per enrollee. According to legal experts, the high court will rule in the matter in the spring of 2015.
