This past month saw directly conflicting U.S. Court of Appeals decisions issued on the issue of whether federal tax credits are available to subsidize premiums for low-income individuals obtaining health insurance coverage through the federally-facilited health insurance marketplace under the Patient Protection and Affordable Care Act (ACA).
In an opinion issued in the case King v. Burwell, on July 22, 2014, the 4th Circuit Court of Appeals issued a decision upholding availability of the federal tax credits in the federally-facilitated health insurance marketplace. 34 states are using a federally-facilitated marketplace. The states of Alabama, Georgia, Kansas, Oklahoma, Nebraska, South Carolina and West Virginia filed an amicus brief in support of the Virginia taxpayers challenging the interpretation of the Internal Revenue Service (IRS) that such subsidies were available, therefore subjecting them to the individual responsibility requirement to purchase health insurance through the federally-facilitated marketplace. The availability of the federal tax subsidies makes the insurance “affordable” for these taxpayers, and they cannot claim an exemption from the individual mandate because of affordability. The Commonwealth of Virginia supported the IRS interpretation.
While the court found the language of the relevant sections of the ACA ambiguous, it deferred to the interpretation of the IRS that federal tax credits are available through the federally-facilitated marketplaces. In a concurring opinion, one judge in the three-judge panel found the relevant sections of the ACA unambiguous in support of the IRS’s interpretation.
On the exactly same day, on July 22, the District of Columbia Circuit Court of Appeals issued a directly contradictory decision in the case Halbig v. Burwell, involving a similar challenge by a resident of West Virginia:
In a 2-1 decision, the District of Columbia Circuit Court interpreted the relevant sections of the ACA literally, to rule that the federal tax subsidies are only available through health insurance exchanges “established” by the states, and not through the federally-facilitated exchange. The same states filed a similar amicus brief challenging the availability of the federal tax subsidies. The dissenting opinion follows a similar rationale used by the 4th Circuit panel in King v. Burwell.
The federal government will seek a rehearing of Halbig decision by the full Circuit Court (an “en banc” review), but the issue may be headed to the United States Supreme Court for ultimate resolution.