Appeals Court Strikes Down ACA Subsidies for Federal Exchanges

A three-judge panel for the U.S. Court of Appeals for the District of Columbia Circuit on Tuesday, in a 2-1 decision, ruled that subsidies to help U.S. residents purchase coverage through the Affordable Care Act's federal insurance exchanges are illegal, the Washington Post reports (Somashekhar, Washington Post, 7/22).

Background on the Case

The lawsuit -- Halbig v. Burwell -- targets a May 2012 Internal Revenue Service rule that allows subsidies to be offered through the federal exchange.

The suit's 12 plaintiffs -- including a hospital chain and a restaurant franchise -- argue that the IRS rule should be invalidated because it contradicts what Congress originally intended in the ACA. Numerous ACA opponents also have argued that IRS exceeded its legal authority by issuing the rule.

However, U.S. District Court Judge Paul Friedman in January ruled against the plaintiffs, stating that both the text of the ACA and the law's structure "make clear that Congress intended to make premium tax credits available on both state-run and federally facilitated exchanges." The plaintiffs filed an appeal following the ruling.

Initial arguments were heard in the appeal at the U.S. Court of Appeals of the D.C. Circuit in March (California Healthline, 7/18).

Potential Impact of Ruling

According to the Post, the ruling might be "more damaging" to the ACA than last month's Supreme Court ruling on the law's contraceptive coverage requirements. If the ruling ultimately stands, it could mean that residents of 27 states -- most of which have Republican governors who oppose the law -- would not have access to subsidies to help them purchase coverage through the exchange, which could make coverage unaffordable for millions.

Next Steps

The Post reports that the federal government can now request an "en banc" hearing, in which the entire appeals court would consider the case. The case also could land at the Supreme Court (Washington Post, 7/22).