Split on Important ACA Provision
July 28, 2014
Recently, two federal appellate courts ruled on the same health care reform issue and each reached opposite conclusions. Both courts considered the question of whether the Affordable Care Act (ACA) permits the Internal Revenue Service (IRS) to provide tax credits for health insurance purchased through the federally-facilitated exchange (also referred to as the federal exchange or health insurance marketplace). Under ACA, these tax credits provide a premium subsidy for lower-income participants purchasing insurance on the exchange. Plaintiffs in both cases asserted that the premium tax credits available to individuals are only available for plans purchased through a state exchange as the ACA does not permit subsidies for coverage purchased through a federal exchange. As a good portion of the states decided not to establish an exchange, the federal government was forced to set up the exchange in those states. Thus, the friction.
As a result of the District of Columbia Circuit Court and Fourth Circuit Court conflicting opinions, this will likely force the issue to be deliberated by the Supreme Court. Based on the Court’s calendar, this decision will likely come about in July 2015.
Due to this conflict between the two circuit courts, there will be no immediate effect on employers or individuals. Therefore, employers should continue to focus on ACA compliance obligations for the upcoming 12 months. Bottom line: Nothing has changed; at least until the Supreme Court addresses this matter.