Circuits Split Over Health Exchange Subsidies

Tomek J. Koszylko, Hanson Bridgett LLP

In a development that may ultimately make its way to the U.S. Supreme Court, two federal appellate rulings were issued on Tuesday that took contradictory stances on a key element of the Affordable Care Act (“ACA”). At issue is whether IRS rules that provide federal subsidies to cover the cost of health insurance premiums purchased on the federal exchange are valid.

In Halbig v. Burwell, a three-judge panel of the U.S. Court of Appeals for the District of Columbia held 2-1 that the ACA allows federal subsidies to people who purchased policies through state-run exchanges only, and not the federal exchange. Under the Halbig ruling, insurance policies purchased in the 36 states that deferred to the federal exchanges would not be eligible for the premium subsidies.

Conversely, in King v. Burwell, a three-judge panel of the Fourth Circuit unanimously upheld the subsidies, stating that the language of the ACA was ambiguous on this point, and that rules issued by the IRS that provide the subsidies to both state-run exchanges and the federal exchange are a permissible exercise of agency discretion.

The circuit split strikes at a key element of the ACA. Without the subsidies, insurance policies would be unaffordable to the vast majority of the individuals purchasing them on the federal exchange.

It is likely, but not certain, that the case will land in the Supreme Court. The Halbig and King rulings may still be reviewed and reconsidered by a full panel of judges (en banc)in their respective circuits.  However, if the circuits decline en banc review, or if the en banc decisions remain in conflict, or if other federal circuits issue additional conflicting opinions, or if either side successfully appeals the ruling, the matter will find itself on the Supreme Court’s docket.

About the author:

 Tomek J. Koszylko, Hanson Bridgett LLP, is the chair of the Barristers Club Health Law section.