King v. Burwell: The U.S. Supreme Court Case Challenging the ACA Subsidies in Federal Marketplaces

Who
Anyone receiving a subsidy through a federally established ACA health marketplace - also called exchanges. Federally established marketplaces are in all states except:

States with State-Established Marketplaces

California Hawaii Massachusetts New Mexico* Rhode Island
Colorado Idaho Minnesota New York Vermont
Connecticut Kentucky Nevada* Oregon* Washington
District of Columbia Maryland      

*State run marketplaces using federal website

When
he Supreme Court justices will hear arguments starting today, March 4, 2015, and likely rule by the end of June or early July 2015. Federal marketplace subsidies could end by the following month.
 
What
The legal challenge is to the 2012 IRS ruling that allows ACA subsidies for policies purchased in federally-run marketplaces.
 
Executive Summary
The ACA specifies subsidies are available in "an Exchange established by the State..." In 2015, only 13 states and D.C are operating pure state-run exchanges. Three (3) states use the federal website. 37 states use federal exchanges. About 6 million people were enrolled in the federal exchanges in 2014. 85 percent or 5.1 million received subsidies.

Against Federal Marketplace Subsidies
For Federal Marketplace Subsidies
The law clearly restricts the subsidies to state exchanges. The IRS cannot unilaterally change legislation or provide subsidies without authorization by Congress. It was the intent of legislators to make subsidies available in all states. There are too many people with existing subsidies to eliminate them. And, "established by the State" should be interpreted as meaning government-run (federal or state) exchanges.

Potential Impact of Negative Ruling
Subsidies in federally-run marketplaces will cease. State-run marketplaces will continue to provide subsidies. Other states may consider building a state marketplace. States with federal marketplaces will be unable to impose the employer mandate penalties (because the penalties are triggered when someone without access to employer­-based coverage receives subsidized coverage). The individual mandate would not apply, if the lowest-­priced non-subsidized) coverage available costs more than 8 percent of their household income. Congress will need to move quickly to pass legislation creating a cost effective alternative or bridge for those losing subsidies.
 
Actions
If the Supreme Court rules in favor of federal marketplace subsidies, there will be no change. If the court rules against federal marketplace subsidies, individuals affected may be able to drop insurance altogether or buy otherwise non-qualified plans. In states affected, employers will not be subject to the employer mandate.

For more information about this strategy and how IPS Advisors can benefit you visit us at www.ipsadvisors.com or click a link below.

 

The information provided is for educational purposes only. This information is from sources we believe to be reliable, but we cannot guarantee or represent that it is accurate or complete. The opinions are those of the writer, and the opinions and information presented are subject to change without notice.

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