Yet another curve ball has been thrown into mix as the federal court system interprets provisions related to the implementation of the Affordable Care Act (ACA). In mid-July, two U.S. appeals courts issued conflicting rulings on whether consumers can receive subsidies for health care coverage bought on the ACA’s federal exchanges, adding another layer of uncertainty and complexity to the health care law signed four years ago.
On July 22, the U.S. Court of Appeals in the District of Columbia ruled in Halbig v. Burwell, on a 2-1 vote, that ACA’s subsidies for middle- and low-income Americans are not accessible in the 36 states with federally-run exchange – including Ohio. However, they are available in the 14 states, plus the District of Columbia, that operate state-based exchanges.
A few hours later in the day, the Fourth Circuit of Appeals in Richmond, VA reached a different conclusion, unanimously ruling that the subsidies are available in all states, regardless of whether the exchange is operated by the federal government or the state.
Why the dispute?
So how can these two courts have such differing interpretations of the law? The issue here is an interpretation made by the Internal Revenue Service as it was implementing the ACA. As written, ACA allows subsidies that are available only “through an exchange established by the state.” However, the IRS expanded that and permitted subsidies in all states no matter which type of exchange (federal or state run) was established.
There are two sides to the argument; while some say the law is written clearly and allows subsidies in state-managed exchanges only, others argue that Congress intended for subsidies be offered on all exchanges regardless of who runs the exchange.
These two rulings won't have an immediate impact on the Americans who have already received subsidies on the federal exchange, but they have produced a new set of unknowns regarding ACA that may not be settled before open enrollment begins Nov. 15.
The Supreme Court may decide to step in to resolve the dispute, setting the stage for a third high-court ruling on the health law. Should the District of Columbia Circuit's ruling prevail, it would serve as a major setback to the law by making subsidies unavailable in as many as 36 states where the federal government has run some or all of the insurance exchanges.
Impact on small business
Ohio has a federally-run exchange. While businesses with fewer than 50 employees are not required to provide health insurance, these rulings may impact a business owner’s decision whether or not to continue offering insurance or could change their mindset around obtaining individual health insurance through the exchange. On the former point, if subsidies are no longer permissible in states with a federal-run exchange, employers may think twice about cancelling their coverage and sending their employees to the exchange because the employees will no longer be able to obtain the financial assistance to obtain coverage via the exchange. On the latter point, a small business owner may opt to keep his/her company insurance plan because the cost of purchasing insurance on a federal exchange may not be mitigated any longer by the subsidy. Subsidies will likely remain in place until a final decision is made; however, this is not an absolute certainty.
Right now, we are advising our members to talk through this issue with their health insurance broker or carrier, such as Medical Mutual. We will continue to provide more information as it becomes available. If you have any questions related to this ruling, please call 216.592.2228.