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Rebecca Farley

Director, Policy & Advocacy, National Council for Behavioral Health

Judge Rules Against Health Insurance Subsidies in Federal Marketplace

October 8, 2014 | Health Insurance Exchanges | Comments
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Last Tuesday, a federal judge in Oklahoma ruled that Affordable Care Act (ACA) subsidies can’t go to consumers who obtained health coverage through the federal insurance marketplace. The ruling is the latest in a series of challenges to the legality of health insurance tax credits in states that opted not to run their own health insurance marketplaces. Two other federal courts have previously issued conflicting rulings on this issue.

In 2012, Oklahoma challenged an Internal Revenue Service (IRS) rule that enabled consumers in states that used the federal exchange to get the tax credits, which lower coverage costs. Critics have argued that language in the ACA only allows subsidies to be provided through states that set up their own exchanges. Last week, U.S. District Judge Ronald White ruled in favor of the state’s lawsuit challenging the IRS regulation, calling the agency’s rule arbitrary and capricious. However, White placed his ruling on hold pending an appeal, which means subsidies for plans purchased through the federal exchanges will still be available in Oklahoma. The Obama Administration can appeal the decision to the 10th U.S. Circuit Court of Appeals in Denver.

The ruling is the latest to weigh in on the legality of subsidies on the federal exchange. In September, the U.S. Court of Appeals for the District of Columbia granted an Obama Administration’s request to reconsider a case challenging insurance subsidies in the ACA. A three-judge panel had struck down the IRS regulation making subsidies available nationwide. That decision to rehear the case with a full roster of judges was widely viewed as making it less likely the Supreme Court would get involved. The appeals court said it would hear new oral arguments on Dec. 17. Opponents of the subsidies said White’s ruling could push the high court to review the issue. The Obama Administration is expected to appeal Judge White’s ruling to the 10th Circuit Court of Appeals. The White House and Congressional Democrats say the law was written to allow anyone to get subsidies — and that any contradictory ACA language was written in error.