Another volley in the ongoing legal battle over the Affordable Care Act is one that—depending on its outcome—may affect policyholders who purchased coverage through the online federal marketplace.
In a case before a US District judge in Oklahoma, Judge Ronald White ruled that health insurance subsidies being granted to people in states that did not set up their own insurance exchanges constitute an “invalid implementation” of the law and an “abuse of discretion” by the federal government and are illegal.
The ruling is just one in a string of court decisions on controversial regulations allowing for health insurance tax credits in all states. One case has already been appealed to the US Supreme Court.
Those against the allowance, like Oklahoma Attorney General Scott Pruitt, argue the law does not explicitly allow for subsidies to be paid for people purchasing insurance in states defaulting to HealthCare.gov.
Pruitt argues that in allowing the IRS to enact millions of dollars in tax penalties on employers, the federal government is granting the department a power it never had. He also believes it allows the government to “punish” states who chose not to create their own exchanges.
The Obama administration, meanwhile, contends it is “standing in the shoes” of the 36 states who chose not to establish their own exchanges.
The White House did not comment on the ruling, and the case is expected to appear before the 10th US Circuit Court of Appeals in an appeal.
The question is being considered in a similar court case in the 4th US Circuit Court of Appeals, which upheld the subsidies and is being appealed to the Supreme Court. If the 10th Circuit strikes down the subsidies, legal experts consider it likely the Supreme Court will step in to decide the issue.
A three-judge panel in Washington also considered the issue, ruling against the Obama Administration. However, the full appeals court threw out the ruling and said it would decide the case.
No rulings currently impact policies today. However, 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.
Fortunately, if subsidies are struck down, the National Association of Health Underwriters believes it unlikely the government would require clients to repay those subsidies retroactively, “assuming that the individual was legally eligible for the subsidy at the time of the receipt.”
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