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U.S. Court of Appeals Rules in Favor of Halbig

July 22, 2014

The case, Halbig v Burwell, challenged the Obama administration’s interpretation that subsidies are available in states with a federally facilitated exchange/marketplace. With a 2-1 ruling the Court agreed with Halbig that the wording of the Affordable Care Act prohibits subsidies in anything but a state exchange/marketplace. The court sided with Halbig and others who challenged the availability of Affordable Care Act subsidies for insurance purchases made through state exchanges/marketplaces.

The U.S. Court of Appeals for the District of Columbia Circuit invalidated an IRS regulation stating that Affordable Care Act subsidies could be offered to individuals that qualified due to modest income regardless of where they purchased coverage – either on a state exchange/marketplace or one run by the federal government. The ruling has serious potential ramifications.

While it is unclear at this moment as to what the next step may be, if the ruling is upheld by either the full Circuit Court of the U.S. Supreme Court, therefore making subsidies unavailable in Michigan and 35 other states where the federal government manages the insurance exchanges/marketplaces, the Affordable Care Act could be seriously crippled. With these subsidies now in serious peril of being unavailable, careful consideration should be given to your conversations with customers thinking of dropping group health insurance as an employee benefit and sending employees to the exchange/marketplace for subsidies.

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