On Tuesday, July 22, two United States Courts of Appeals issued contradictory rulings on consumers’ ability to obtain subsidized health insurance through the Affordable Care Act (ACA). The ACA authorized states to create statewide health insurance marketplaces that allow people to buy health insurance for themselves and their families. If a state decides not to run its own marketplace, the federal government takes the lead in managing the state’s marketplace instead. Under the ACA, people who buy insurance on statewide exchanges can receive tax credits to help cover the cost of insurance if they earn between 133 percent and 400 percent of the Federal Poverty Level (FPL) and who do not have access to affordable insurance through some other source such as their employer.
Individuals who did not want to buy health insurance filed lawsuits in D.C. and Virginia, arguing that the federal government could give tax credits to people who buy health insurance in a state-operated marketplace, as opposed to one operated by the federal government. The plaintiffs in these lawsuits were people who lived in states that did not operate their own marketplaces and who did not want to purchase health insurance, but would be subject to a tax penalty under the ACA unless they could show that they lacked access to a health insurance plan that cost less than 8 percent of their yearly income. Because the health insurance tax credits reduced their out-of-pocket cost for insurance purchased on the marketplace, they would be subject to a tax penalty for not purchasing insurance unless the court struck down the credits.
In the D.C. lawsuit, Halbig v. Burwell, the D.C. Circuit held that, under the ACA, the federal government could only give tax credits to people who bought insurance through state-operated marketplaces, and not federally-operated marketplaces. In the Virginia Lawsuit, King v. Burwell, 7 the Fourth Circuit came to the opposite conclusion and held that tax subsidies were available to people in any state. The federal government plans on appealing the D.C. Circuit’s ruling by asking for an en banc review, which would require all 11 judges of the D.C. Circuit to review the decision. In the meantime, the tax credits will continue to be available to eligible individuals regardless of where they live.
The ultimate outcome of these lawsuits, however, has the potential to affect access to health insurance in 36 states that decided not to operate their own health insurance marketplaces. Lack of access to tax credits may render health insurance out of reach to numerous workers with disabilities with incomes below 400 percent of FPL, and who do not have access to insurance through their employers or a Medicaid “buy-in” program. Faced with possible loss of coverage, individuals with disabilities – especially those with significant and ongoing health care needs – may be forced to reduce their hours to preserve their eligibility for Medicaid coverage or may forego work altogether.
Further coverage of the cases, as well as the text of the D.C. Circuit and Fourth Circuit opinions, is available via the Washington Post: www.washingtonpost.com/national/health-science/federal-appeals-court-panel-deals-major-blow-to-health-law/2014/07/22/c86dd2ce-06a5-11e4-bbf1- cc51275e7f8f_story.html