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Obamacare FAQ of the Month: Another Ruling Against the ACA - What Does it Mean for My Company?

August 2014

By: Peter E. Hansen, Esq.

On July 22, 2014, the District of Columbia Court of Appeals found that insurance subsidies may not be awarded to individuals who purchase insurance through federally-run insurance exchanges. Later that same day, the Fourth Circuit Court of Appeals found the exact opposite. The argument is complex and technical (i.e., boring), so for our purposes, the question boils down to: should subsidies to purchase health insurance be available in every state, or only in those states that set up their own insurance exchanges?

The District of Columbia found that Congress intended subsidies to be available only in states that set up their own insurance exchanges. If the District of Columbia rationale prevails, then states with federally-run insurance exchanges - including Illinois, Iowa, and Wisconsin - may no longer offer subsidies to individuals who purchase health insurance through the insurance exchange. Conversely, if the Fourth Circuit rationale prevails, then subsidies will continue to be available in all states.

In many ways, this is the most serious threat to the Affordable Care Act (ACA) because it could eliminate subsidies to a large number of individuals, thereby impacting the ACA's internal function. Of course, the Obama administration already challenged the District of Columbia ruling, so it may be some time before we know the impact of the decision.

Questions? Suggestion for a future Obamacare FAQ of the Month? Please contact WS Attorney Peter E. Hansen at (262) 560-9696, or email pehansen@wesselssherman.com .