New Challenge to the Affordable Care Act

New Challenge to the Affordable Care Act

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by Jonathan Schulman on 07/08/2014Leave a Comment
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A new legal challenge to the Affordable Care Act – the most fundamental to date – is about to be decided on by the U.S. Court of Appeals for the D.C. Circuit:  Halbig vs. Burwell.

Halbig vs. Burwell challenges subsidies in the form of tax credits made available to those within 400% of the federal poverty level who signed up for plans through the state exchanges.  When the Affordable Care Act was crafted, incentives were designed for states to set up health insurance exchanges and disincentives for them to opt out.  The law was written to provide subsidies only to those enrolled in insurance plans through exchanges “established by the state.”

However, despite the incentives – and to the great surprise of those who crafted the law – some 34 states opted not to establish their own exchanges, leaving it to the federal government to do so.

The Halbig plaintiffs – individuals and small businesses with group health insurance plans in six states that didn’t establish state exchanges – objected that, without the tax credits, they could have claimed exemptions from the individual mandate penalty, because they would have been deemed unable to pay for coverage.  If the court agrees with them, the cost of insurance would go up in all 34 states that didn’t establish state exchanges, and the resulting exemptions could lead to a mass exit from the federal exchange plans.

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