Last week, two court rulings about the wording of the health care law may change the face of “Obamacare”. The case revolves around four words of the Affordable Care Act, which says the tax credits are available to people who enroll through an exchange “established by the state”. Millions of people may see premium increase if the court ruling stands. They would lose their premium tax credit that are making their premiums more affordable.
Since majority of those who enrolled with tax credit, used federal exchanges, it can be devastating to the life of “Obamacare”.
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The court ruling in Halbig v. Burwell, in which a panel of U.S. Courts of Appeal for the District of Columbia found that premium tax subsidies could only be awarded in states that have their own health insurance exchanges. Only 14 states elected and implemented a health insurance exchange. In the 36 states that used the federal Insurance Exchange this year, about 87 percent of those enrolled in a private plan qualified for a premium subsidy.
Within hours of the ruling, unanimous three-judge panel of the U.S. Court of Appeals for the Fourth Circuit, in Richmond VA, issued a ruling that came to the opposite conclusion.
The Fourth Circuit panel upheld the subsidies and said the IRS ruling was “A permissible exercise of the agency’s discretion”.
The language of the Affordable Care Act on this point is “Ambiguous and subject to multiple interpretations,” the Fourth Circuit panel said. It gave deference to the tax agency.
Subsidies in the form of a tax credit are a major element of the health care law. Without them, many of them would be faced with unaffordable premiums, purchasing a new “Qualified Health Plan”, mandated by the new health care law.
The employer mandate would become meaningless in states where subsidies were unavailable. This leaves employers with one less incentive to drop the employer sponsored health plan and let their employees go to the exchanges to receive a tax credit.
The Obama administration filed an appeal to the court ruling not to long after they have been briefed on the news. At the moment, there is no change to the premium tax credit on the state or the federal level. Those who purchased a plan through the federal exchange will see no premium change as a result of the court ruling. Stay tuned for more updates as the court system evaluates the health care law wording.
Butch Zemar