This Week – July 26, 2014
This Week in Washington DC:
- ACA Legal Challenges Continue: Courts split on whether premium subsidies are available for certain health exchanges
Federal appellate court decisions cloud future of subsidies to purchase insurance
On Tuesday, July 22nd, a three-judge panel from the Washington D.C. federal appeals court ruled that subsidies to purchase health insurance are only permissible in states that have set up their own health exchanges (Halbig v. Burwell). However, just a few hours later, a separate three-judge panel from the federal appeals court in Richmond, VA ruled that both state and federally facilitated health exchanges are eligible for these subsidies (King v. Burwell).
ISSUE SUMMARY FOR THE BUSY GI CLINICIAN
The Patient Protection and Affordable Care Act (now known as the ACA) provides for subsidies in the form of tax credits to assist people to purchase health insurance. Persons up to 400% of the federal poverty level (FPL) are eligible for these subsidies. In 2014, this means that a single person earning $46,680 per year is at the 400% level, or a family of four earning $95,400 per year.
Section 1311 of the ACA delegates the responsibility of setting of exchanges to the states. However, since Congress cannot compel states to implement federal law, Section 1321 of the ACA provides that the Federal Government will set up an exchange for any state refusing or unable to establish its own health exchange. At issue is the language in the ACA authorizing premium assistance for those purchasing insurance: Section 1401 of the ACA only mentions exchanges “established by the state under section 1311.”
In May 2012, the Internal Revenue Service (IRS) released the regulation implementing these premium assistance rules under the ACA, providing that tax credits are available for eligible persons purchasing health insurance through an exchange established by the state or administered by the Federal Government.
The plaintiffs argue that the ACA clearly allows premium assistance only for those purchasing health insurance when established by the state. The Obama Administration argues that when considering the congressional intent, and reading the ACA in full context, it is clear that subsidies are authorized for purchasing health insurance when exchanges are established by state as well as when the Federal Government has to step into the shoes of a state unwilling or unable to establish a health exchange.
The Obama Administration will likely request the full D.C. appeals court to review the case, meaning that all eleven judges will review the case. The plaintiffs in the King case also have the opportunity to request a review by the full panel of judges.
There are two ongoing suits currently sitting in federal courts in Oklahoma and Indiana as well. The issue may ultimately go to the Supreme Court.
Impact to Your GI Practice and Your State:
The IRS regulation remains in effect until further guidance from the courts. As a practice and business owner, premium assistance in the form of tax credits is available to eligible employees purchasing health insurance in a state that has established its own exchange, as well as in a state where the Federal Government runs the exchange.
The issue may have significant impact to your patients in the future. Only sixteen states and D.C. run their own exchanges. What’s more, three of these states (OR, MA, and MD) may switch and rely on the Federal Government to administer the exchange beginning in 2015. According to the Kaiser Family Foundation, out of the 6.7 million people who have signed up for health insurance (federal and state exchanges) and are eligible for premium assistance, an estimated 4.6 million people live in states where the Federal Government administers the health exchange. This means that many of your patients may drop, or be forced to drop, their health insurance should the courts ultimately agree with the three judges in the Halbig case.
Please stay tuned for further updates. Please also share and discuss your thoughts with fellow ACG members on the ACG GI Circle. To login and share your comments, go to gi.org and sign in as a member. Once you have done so, click here and then click the orange "Visit ACG GI Circle" button to be taken to the GI Circle site. If you have not yet activated your ACG GI Circle account, please email us at email@example.com.
Contact Brad Conway, VP Public Policy, with any questions or for more information.