Last week U.S. Circuit Court of Appeals for the District of Columbia ruled that subsidies to help pay the insurance premium for individuals in states using the federal exchange, instead of their own, are illegal. Within just two hours a panel of the U.S. Court of Appeals in the 4th District, based in Richmond, contradicted the ruling in a separate case. Ultimately the Supreme Court may need to decide, but it likely wouldn’t until some time next year. Alternatively, Congress could try to change the law enabling individuals to receive subsidy from the federal exchange, but this seems highly unlikely with a Republican majority in the House.
If the courts uphold the ruling that subsidies through the federal exchange are illegal, the consequences are huge. In addition to the 7 million people losing $36 billion of premium assistance and likely dropping coverage, employers in the 35 states that utilized the federal exchange would not be facing penalties as they are dependent on employees receiving subsidies.
Dinsmore’s David Whaley and Nicole Hanna wrote a very interesting article titled, Future of the Affordable Care Act in Jeopardy in Many States.
All the uncertainty is applying tremendous pressure on governors of states that utilize the federal exchanges. It will be very interesting to see how quickly changes are made to the law. This year’s open enrollment begins in just a couple months and will be significantly impacted by the contradictory rulings.