U.S. Supreme Court Will Hear Challenge to ACA Subsidies in Federal Exchanges

On Nov. 7, 2014, the U.S. Supreme Court agreed to review a lawsuit challenging the ability of the federal government to provide subsidies under the Affordable Care Act (ACA) to individuals in states that did not establish their own Exchange (that is, states with federally-facilitated exchanges, or FFEs). Several lawsuits have argued that the IRS rule authorizing subsidies in all states conflicts with the text of the ACA. They assert that, according to the law’s plain language, the ACA only authorized subsidies to be provided in states that have established their own Exchanges.

Oral arguments in the case have not yet been scheduled, but are expected to take place in February or March 2015. A ruling from the Supreme Court is not expected until the end of the current term, in late June or early July 2015. As a result, this issue will not be resolved before the start of the 2015 open enrollment period, which begins Nov. 15, 2014. The Obama Administration has indicated that federal subsidies will continue to be available to eligible individuals in all states, including those with FFEs. On Nov. 7, 2014, the White House posted a statement to confirm that nothing has changed at this time for individuals receiving advance payments of the premium tax credit and that tax credits remain available.

Lawsuits Challenging Subsidies in FFEs

Several lawsuits have been filed in response to an IRS rule authorizing subsidies in all states, including those with FFEs. These cases challenge the ability of the federal government to provide subsidies to individuals in states with FFEs.

A number of lawsuits are still pending in federal courts. However, on July 22, 2014, two federal appeals courts issued inconsistent rulings on the availability of subsidies in states with FFEs.  These cases, Halbig v. Burwell and King v. Burwell, were filed by individuals and employers in states that have FFEs.

They argued that the IRS rule authorizing subsidies in all states conflicts with the text of the ACA. They assert that, according to the law’s plain language, the ACA only authorized subsidies to be provided in states that have established their own Exchanges.

Initially, these rulings resulted in a split between the federal appeals courts. However, on Sept. 4, 2014, the District of Columbia (D.C.) Circuit Court agreed to reconsider its ruling in Halbig v. Burwell, eliminating the inconsistency between federal courts.

 

DISCLOSURE

The information provided herein is intended solely for the use of our clients. You may not display, reproduce, copy, modify, license, sell or disseminate in any manner any information included herein, without the express permission of the Publisher or Publishers of articles within.

The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.