A federal appeals court ruled Tuesday that participants in health exchanges run by the federal government in 36 states are not eligible for tax subsidies. A separate court upheld the system a few hours later, setting up a potential Supreme Court showdown.
After the rulings, the White House said that policyholders will keep getting financial aid as the administration sorts out the legal implications.
In the case, decided by the U.S. Court of Appeals for the District of Columbia Circuit, a group of small business owners argued that the law authorizes subsidies only for people who buy insurance through markets established by the states — not by the federal government.
The Fourth District supported the availability of premium tax credits in federal and state marketplaces.
Four words in the Affordable Care Act were the basis of the small business owners suit and said that tax credits are available to people who enroll through an exchange “established by the state.”
The challengers argued that a literal reading of that language invalidates an Internal Revenue Service subsidy to people in the federal exchanges.
A divided court agreed, in a 2-1 decision that could mean premium increases for more than half the 8 million Americans who have purchased taxpayer-subsidized coverage under the law. The ruling affects consumers who bought coverage in the 36 states served by the federal insurance marketplace, or exchange.
The majority opinion concluded that the law, as written, “unambiguously” restricts subsides to consumers in exchanges established by a state. That would invalidate the Internal Revenue Service regulation that tried to untangle confusing wording in the law by concluding that Congress intended for consumers in all 50 states to have subsidized coverage.
The American Heart Association, American Cancer Society, American Cancer Society Cancer Action Network and American Diabetes Association filed an amici brief in the case (then Halbig v. Sebelius) in February arguing that Congress intended to provide premium tax credits to consumers in both state-run and federal marketplaces as a way to make health coverage more affordable.
“On behalf of the tens of millions of people nationwide who have experienced cancer, diabetes, heart disease and stroke, we are deeply disappointed with the decision of the U.S. Court of Appeals for the D.C. Circuit, which denies premium tax credits that make health coverage more affordable to people who buy a plan in the federally facilitated marketplace. Two federal district courts, including the lower court in this case, previously ruled that tax credits are available in the federal marketplace under the Affordable Care Act. Today’s decision will not be the final word on this matter,” the groups released in a joint statement following the ruling.
“We hope other courts considering similar statutory questions conclude that both federally-facilitated and state-run marketplaces should offer premium tax credits that make lifesaving health care more affordable for millions of patients and survivors,” the statement said.
Being uninsured can be disastrous for the chronically ill, according to the AHA. Studies show people without health insurance are likely to delay treatment. Furthermore they are less likely to receive screenings or other services that prevent and detect disease early.
The Associated Press contributed to this article.