Healthcare Business News

Federal judge rejects challenge to ACA subsidies

By Harris Meyer
Posted: January 15, 2014 - 2:45 pm ET

A federal judge in Washington, D.C., Wednesday strongly rejected a major challenge to the healthcare reform law, ruling that the law allows the federal government to offer premium subsidies to people who buy insurance coverage through the federal insurance exchange and not just through state-run exchanges.

But an appeal is expected in the case, and several lawsuits involving the same issue are pending around the country. Experts say it's possible that the U.S. Supreme Court ultimately will decide the issue.

U.S. District Judge Paul Friedman, an appointee of President Bill Clinton, granted summary judgment to the government in the case of Halbig v. Sebelius. He threw out a suit filed by opponents of the law that would have blocked federal subsidies for low- and middle-income families who buy insurance through a federally run exchange serving 36 states.

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Friedman wrote that interpreting the language of the law to mean that subsidies are available only to those purchasing insurance from the state-run exchanges runs counter to the central purpose of the Patient Protection and Affordable Care Act, which is to provide affordable healthcare to virtually all Americans.

Subsidies to purchase insurance on an exchange are available to anyone with income less than 400% of the federal poverty level, which is $94,200 for a family of four in 2013. If the plaintiffs had prevailed, that could have cut off subsidies to help people buy coverage, a key element of the law.

Thirty-six states did not set up an exchange themselves. In those states, either the federal government is running the exchange or the state has partnered with the feds in running it.

The legal question in the Halbig case centered on the precise wording in the section of the Affordable Care Act that describes eligibility for the subsidies. The law says subsidies to purchase insurance through an exchange will be provided to individuals and families who got insurance “through an exchange established by the state.” The IRS issued a rule interpreting that to mean any health insurance exchange, not just the state-run exchanges.

The plaintiffs argued that they should not be eligible for the subsidies because they live in states where the federal government, not the states, are running the exchanges. The imposition of subsidies to purchase insurance “injures” the individuals because the subsidies increase the plaintiffs' income to the point that they cannot qualify for an exemption from the reform law's requirement that nearly all Americans purchase insurance, the lawsuit says.

Friedman wrote that the plain language of the law, “viewed in isolation,” appears to support the plaintiffs' interpretation. But, he continued, “the court finds that the plain text of the statute, the statutory structure and the statutory purpose make clear that Congress intended to make premium tax credits available on both state-run and federally-facilitated exchanges.”

He added that Congress has directly spoken to the precise question of whether an exchange under the law includes federally-facilitated exchanges. “And that must be the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.”

Follow Harris Meyer on Twitter: @MHHmeyer

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