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Appeals courts disagree on key component of Affordable Care Act

Laurel Andrews

Two federal appeals courts came to opposite conclusions Tuesday regarding the government’s ability to subsidize health care plans under the Affordable Care Act, a key component of the federal health care law.

At stake is the cost of 4.6 million health care plans nationwide, including more than 11,000 plans in Alaska that qualify for federal subsidies through Healthcare.gov.

However, the rulings will not affect any health insurance plans until the cases wind their way through the legal system, a process that can take years, said Susan Johnson, Region 10 director for the U.S. Department of Health and Human Services.

“Nothing changes,” Johnson said. “Tax credits remain available.”

The crux of the issue was whether the government could legally subsidize plans in states that opted out of creating their own health care exchange and instead relied on the federally-run marketplace, Healthcare.gov. Dozens of states, including Alaska, opted out of creating a state exchange. 

A three-judge panel for the U.S. Court of Appeals for the District of Columbia Circuit ruled 2-1 in Halbig v. Burwell that subsidies may not be offered for the 36 states where online insurance marketplaces are run by the federal government. 

The ruling noted that ACA language specifies subsidies be available for “an exchange established by the state” and the ACA “does not authorize the IRS to provide tax credits for insurance purchased on federal exchanges.” 

“We reach this conclusion, frankly, with reluctance,” circuit Judge Thomas Griffith wrote in the ruling. “At least until states that wish to can set up exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal exchanges and for health insurance markets more broadly.”

Also Tuesday, the 4th Circuit Court of Appeals in Richmond, Virginia., issued a conflicting ruling in King v. Burwell. The court ruled that Congress had intended for the IRS to provide subsidies on federal health care exchanges.

Circuit judge Roger Gregory wrote in the decision that it was clear that “widely available tax credits are essential to fulfilling the act’s primary goals and that Congress was aware of their importance when drafting the bill.” 

Nationwide, roughly 5.4 million people signed up for health care plans through federally run marketplaces, according to the Department of Health and Social Services. Of those, 4.6 million people qualified for subsidies.

A total of 12,890 Alaskans enrolled in health care plans under ACA as of March 31. Of those, 88 percent -- more than 11,000 -- qualified for financial assistance.

The White House on Tuesday said the Department of Justice would appeal the Halbig v. Burwell ruling, asking that the entire 11-judge panel on the appeals court review the case. A White House spokesperson said the decision defied Congress' intent in setting up ACA.

“You don’t need a fancy legal degree to understand that Congress intended for every eligible American to have access to tax credits that would lower their health care costs, regardless of whether it was state officials or federal officials who were running the marketplace,” The New York Times quoted Josh Earnest, White House press secretary, as saying. “I think that is a pretty clear intent of the congressional law.”

Should the courts uphold the U.S. Court of Appeals ruling striking down the legality of subsidies for federal exchanges, “we would hope at that point there would be a legal correction through Congress,” Johnson said.