The U.S. Court of Appeals for the D.C. Circuit released a 2-1 decision on July 22, 2014, in the Halbig v. Burwell case determining that the IRS and the federally facilitated exchange marketplace was not authorized to distribute premium tax credit subsidies to individual exchange consumers. The court determined that the Patient Protection and Affordable Care Act (PPACA) unambiguously restricts the availability of subsidies to insurance purchased in state-based exchanges, and that the IRS regulation acted outside of the parameters of the PPACA by making available subsides via the federally facilitated and partnership exchanges. While this decision could eventually have huge ramifications for the health reform law, it is very important to note that the ruling does not change anything regarding the distribution of subsidies or cost-sharing assistance, the operation of the federally facilitated exchanges or enforcement of the employer mandate for the time being.

A conflicting ruling on an almost identical case also issued on July 22, 2014 by the 4th Circuit Court of Appeals in Richmond, VA means this issue will most likely be appealed to the U.S. Supreme Court later this year.  In summary, the health care reform subsidy ruling may have a profound long-term impact but no immediate market change.  Call or e-mail us at (916) 487-4632, if you have any questions.

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