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Appeals courts disagree on whether ACA subsidies are legal


In only one day, the Obama administration suffered a potentially huge loss followed by a victory regarding the legality of Affordable Care Act subsidies and whether consumers buying coverage through the federal health insurance exchange can receive financial assistance.

The healthcare reform law states the government can provide subsidies for exchange plans "established by [a] State." So the question becomes whether the 36 exchanges operated by the federal government can still be considered established by the states.

Two appeals courts reached conflicting decisions yesterday: In Halbig v. Burwell, the D.C. Circuit Court of Appeals ruled subsidies are illegal on federal exchanges. A few hours later, the 4th Circuit Court of Appeals ruled in King v. Burwell that state- and federal-run exchanges can provide subsidies.

At the heart of the matter is whether Congress intended to allow subsidies for consumers shopping on the federal exchange in addition to state-run marketplaces. The plaintiffs in both cases allege that Congress wanted to compel states into operating their own exchanges by blocking subsidies if they opted for the federal exchange. But the Obama administration claims the plaintiffs' argument defies the key purpose of the ACA--to help more people gain affordable health insurance, Politico reported.

The issue is likely headed for the U.S. Supreme Court, which could ultimately determine whether HealthCare.gov can offer subsidies for its plans in the next year or two, reported The Washington Post. If the high court determines that subsidies for HealthCare.gov plans are illegal, more than 7 million people could lose $36 billion in financial assistance, leaving some of them unable to afford insurance coverage.

Some policy experts believe the Obama administration could craft a workaround if subsidies are ultimately deemed illegal. "The administration is likely to pursue a fix that would circumvent the court decision," Caroline Pearson, vice president at Avalere Health, told Talking Points Memo. "One such scenario would be for [the U.S. Department of Health and Human Services] to effectively deem all of the exchanges to be state-based, but continue operating them through HealthCare.gov."

To learn more:
- here are the rulings: Halbig and King
- read the Politico article
- see The Washington Post article
- check out the Talking Points Memo article

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Court rules subsidies legal in all states, on both exchanges
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