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Health

Courts issue conflicting rulings on Obamacare subsidies

Two federal appellate courts on Tuesday handed down conflicting rulings on whether the government can subsidize health insurance premiums for millions of Americans who live in states that rely on the new federal health insurance marketplace to enroll in coverage.

The U.S. Circuit Court of Appeals for the District of Columbia Circuit, in a 2-1 decision, ruled that the tax credits provided under President Barack Obama’s health care law can be offered only to states that set up their own marketplaces.

Two hours later, the U.S. Court of Appeals for the Fourth Circuit in Richmond, Va., upheld the legality of the subsidies, saying that a rule issued by the Internal Revenue Service to allow the subsidies nationwide was a “permissible exercise” of the agency to interpret ambiguous language contained in the 2010 federal health law.

The contradictory rulings raise the possibility that the issue will make its way to the U.S. Supreme Court, which already has ruled on two separate issues related to the controversial health law.

At stake this time are federal subsidies to help offset the cost of buying coverage, a key pillar of the law aimed at making insurance affordable for millions of Americans. The subsidies, which come in the form of tax credits, were made available this year to those with annual incomes of up to four times the federal poverty level, or about $31,700 for an individual and $95,400 for a family of four.

If the D.C. Circuit Court of Appeals ruling holds, the subsidies for people in at least 34 states will disappear, affecting the cost of coverage for up to 5 million low- and middle-income Americans, including nearly three quarters of the Illinoisans who signed up for insurance on the federal marketplace this year.

Illinois, which operates its exchange in partnership with the federal government, would lose access to the tax credits unless and until it sets up and runs its own exchange, an effort that has so far failed to win approval in Springfield. About 77 percent – or 168,000 – of those who signed up for 2014 coverage in Illinois were eligible for the subsidies in the first year of coverage, according to federal data.

Nearly two-thirds of those who signed up for coverage on the federal marketplace were able to pay $100 or less per month on insurance premiums, according to U.S. Department of Health and Human Services data. The average monthly subsidy for those who qualified for tax credits was $264, government data shows.

In Illinois, the average enrollee received a $202 tax credit, lowering their monthly premium from an average price of $316 to an average of $114, according to government data.

Jennifer Koehler, a spokeswoman for Get Covered Illinois, the state’s enrollment arm, said the state is monitoring both court decisions, but did not say whether the Quinn administration would more fervently pursue an Illinois-run exchange.

“The bottom line for now is that nothing has changed and the subsidies created under the law to help people cover the cost of their health care remain in effect,” Koehler said, in a statement. “Get Covered Illinois is focused on preparing for the enrollment period for year two that will start” on Nov. 15.

Steve Brown, spokesman for House Speaker Michael Madigan, said there “is no consensus in terms of a plan going forward” for an Illinois-run exchange.

He and John Patterson, the communications director for Senate President John Cullerton, said the two offices will continue to monitor the court cases as litigation continues.

The health law authorized subsidies for insurance bought “through an exchange established by the state,” but only 14 states and the District of Columbia ran their own marketplaces in the first year. The federal government set up and ran exchanges via the HealthCare.gov portal for the remaining 36, including Illinois.

The Internal Revenue Service adopted a regulation in 2012 that said those who buy coverage on a government-run exchange are eligible to receive a tax credit, if qualified by income, “regardless of whether the exchange is established and operated by a state.” 

But in the D.C. ruling, Judge Thomas Griffith said the law “unambiguously restricts the (authorized) subsidy to insurance purchased on exchanges ‘established by the state.’” The health law, he wrote, “plainly makes subsidies available only on exchanges established by states.”

The federal government said it would seek an “en banc” hearing in the D.C. case, in which the entire 11-member appeals court would hear and rule on the case.

pfrost@tribune.com
Follow @peterfrost Follow @chibreakingbiz

Copyright © 2014, The Baltimore Sun
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