The Affordable Care Act on Trial Again in King v. Burwell

bcbs lawsuitBy: Jackie Bain

The Affordable Care Act is heading back to the Supreme Court this Spring.  The issue presented to the Supreme Court on this occasion is whether the IRS is authorized promulgate regulations to extend tax credit subsidies for coverage purchased through Federal Government’s Health Care Exchange.

The Affordable Care Act allows individuals who purchased health coverage through State-established Health Care Exchanges to subsidize a portion of that coverage through the form of refundable tax credits.  The United States treasury directly pays each eligible taxpayer to offset the cost of the taxpayer’s insurance premium.  However, a majority of States (including Florida) have elected not to establish their own Health Care Exchanges.  In order to provide coverage to persons in these States, the Federal Government set up its own Health Care Exchange marketplace. 

The petitioners argue that, although the plain language of the statute limits the subsidies to only those persons who are able to purchase coverage through a State Exchange, the IRS enacted regulations that grant these subsidies to all Exchanges, including the Federal marketplace used by consumers in States that chose not to create their own Exchanges.  The IRS reasoned that the Affordable Care Act was not intended to limit the subsidies to only those consumers in States that chose to establish their own Exchanges.  Moreover, the Federal Government argues that the Federal Exchange is actually individual State Exchanges operated by HHS.  The Government argues that each one is a state-specific marketplace—plans offering coverage on the Exchange in a particular State must be licensed by that State, and premiums for plans offered on the Exchange are based on rating areas and risk pools unique to the State.  However, the petitioners argue that the IRS was not empowered to enact this regulation, and that there should be no subsidies in States that chose not to establish their own Exchanges.

The petitioners argue that employers are also affected by the IRS’ decision to extend the subsidies to States that chose not to establish their own Exchanges.  The Affordable Care Act assesses financial penalties on large employers that do not sponsor health insurance coverage to full-time employees.  However, the payment is only triggered if at one or more employees enroll in Government-subsidized individual coverage. In a State that chose not to establish an Exchange, the petitioners argue that the plain language of the Act would not allow for an individual to enroll in Government-subsidized individual coverage.  Thus, an employer who did not sponsor health insurance would not be subject to a penalty.

In their Petition for a Writ of Certiorari, the individuals challenging the Affordable Care Act assert that The petitioners assert that more clarity is required, because at present “millions of people have no idea if they may rely on the IRS’s promise to subsidize their health coverage, or if that money will be clawed back. Employers in 36 States have no idea if they will be penalized under the ACA’s employer mandate, or are effectively exempt from it. Insurers have no idea if their customers will pay for health coverage in which they enrolled, or if large numbers will default.”

Oral arguments are set before the Supreme Court on March 4, 2015, and a decision will likely be published in June.

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