July 2014

This week separate federal courts reached conflicting opinions regarding the IRS's policy to provide federal premium subsidies to Americans who purchase health insurance through federally run health insurance exchanges.

The DC District Court of Appeals ruled in a 2-1 decision that the text of the Affordable Care Act (ACA) explicitly limits federal premium subsidies to only those who purchase health insurance through state run health insurance exchanges.

Hours later, the 4th District Court of Appeals in Richmond reached a different conclusion in their 3-0 decision saying that the ACA text is unclear on how the federal subsidies are to be allocated and that the IRS acted appropriately in implementing policy to make federal premium subsidies available to those in both federal and state based insurance exchanges.

The Obama Administration is expected to appeal "en banc" – meaning the entire panel of the D.C. District Court judges – to rehear the case. A majority of members of the D.C. District Court judges were appointed by Democratic presidents and are considered likely to overturn the 3 panel judge decision. There is a strong possibility the case will eventually be heard by the U.S. Supreme Court.

An estimated 4.5 million Americans received federal subsidies to purchase health insurance through federally established insurance exchanges. If the courts ultimately limit federal premium subsidies to only state-based insurance exchanges, it will severely limit the ability of the ACA to provide health insurance to uninsured Americans.