Obamacare subsidies in peril as court rulings differ

Two federal appeals courts came down on opposing sides of the subsidies debate, potentially putting plan affordability in peril.

Insurance News


Decisions from two separate federal appeals courts have placed the future of federal government healthcare subsidies in peril.

In a 2-1 ruling from the US Court of Appeals for the DC Circuit, judges ruled that President Barack Obama’s signature healthcare law allows tax credits to be offered to qualifying policyholders enrolling through state-run exchanges only. That means residents in 34 states using the federal exchange, HealthCare.gov, would not be eligible for government help in paying their premiums.

“We reach this conclusion, frankly, with reluctance,” wrote Judge Thomas Griffith on behalf of the 2-1 majority. “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.”

Just two hours later, however, a federal appeals court in Richmond, Va. unanimously upheld the law, with subsidies and tax credits for all American intact.

Elizabeth Wydra, chief counsel at the left-leaning Constitutional Accountability Center, said the differing court decisions set the stage for an ultimate showdown at the Supreme Court.

“If there is a split in the circuits, then I think the Supreme Court would have to step in,” Wydra told USA Today.

Indeed, the US government already plans to appeal the decision from the DC Circuit.

Neither ruling impacts policy today, however. White House press secretary Josh Earnest was careful to note that while the ruling may be “interesting to legal theorists,” it “does not have any practical impact on [consumers’] ability to receive tax credits right now.”

If the ruling is indeed struck down, producers in the majority of US states would be faced with fewer affordable options for clients required by law to carry health insurance.

Already, producers say they have had difficulty finding solutions for clients. According to a Morgan Stanley survey of 148 brokers, premiums increased around the country at an average 11% for group plans and 12% for individual plans.

In some parts of the country, those numbers were even higher—individual plans saw a 100% increase in Delaware, a 90% increase in New Hampshire and a 54% increase in Indiana, according to producer reports.

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