The justices will hear an appeal filed on behalf of four Virginia residents who maintain that subsidies to buy health insurance under the Affordable Care Act (ACA) only apply to an “exchange established by the state.”
Fourteen states set up their own insurance exchanges. But 36 states, including Virginia, declined to do so, so residents in those states use exchanges set up and run by the federal government under HealthCare.Gov.
The appeal pointed out that a 2012 rule by the Internal Revenue Service (IRS) that subsidies could be paid to enrollees of federally-operated exchanges was in direct conflict with the statutory language.
“Notwithstanding the ACA’s text and purpose, the IRS in 2011 proposed, and in 2012 promulgated, regulations requiring the Treasury to grant subsidies for coverage purchases through all Exchanges – not only those established by states under Section 1131 of the Act, but also those established by HHS under Section. 1321….
"These regulations contradict the statutory text restricting subsidies to Exchanges ‘established by the State under section 1311,” according to the lawsuit.
Noting conflicting rulings on the IRS Rule by two appeals courts, the appellants noted: “The resulting uncertainty over this major plank of ACA implementation means that millions of people have no idea if they may rely on the IRS’s promise to subsidize their health coverage, or if that money will be clawed back.
“Employers in 36 states have no idea if they will be penalized under the ACA’s employer mandate, or are effectively exempt from it.
“Insurers have no idea if their customers will pay for health coverage in which they enrolled, or if large numbers will default.
“And the Treasury has no idea if billions of dollars being spent each month were authorized by Congress, or if these expenditures are illegal. Only this Court can definitively resolve the matter.”
White House spokesman Josh Earnest attacked the lawsuit in a statement as a “partisan attempt to undermine the Affordable Care Act and to strip millions of American families of tax credits that Congress intended them to have.”
But the high court’s decision to hear the case is considered a “significant setback for the Obama administration."
Ann Purvis, with the National Center for Policy Analysis, points out that "if the subsidies are struck down, insurance costs for many will skyrocket."
Purvis pointed to a recent RAND Corporation study predicting that "eliminating subsidies entirely would send premiums rising by up to 43 percent and drop Obamacare enrollment by 68 percent."