July 22, 2014
NR 2014-14

For additional information:
Jason Hammersla
office 202-289-6700 / cell 202-422-4652

Conflicting appeals court decisions on health premium subsidies
create additional uncertainty for all stakeholders

WASHINGTON, DC — "Today's conflicting rulings by two separate courts of appeals on whether premium subsidies are available in federally-run insurance exchanges inject enormous uncertainty into implementation of the health care law and raises intriguing questions about its future," Council President James A. Klein said.

The 4th Circuit U.S. Court of Appeals ruled that the Patient Protection and Affordable Care Act (PPACA) does provide for subsidies in the 36 states where exchanges are operated by the federal government. But the Court of Appeals for the District of Columbia Circuit concluded that participants in federally run exchanges are not eligible for tax credits when they purchase a plan to meet their coverage requirement. "Since millions of people have been relying on the legality of the subsidies, the real wild-card today is the D.C. Circuit Court decision. Ultimately, this issue seems destined for the U.S. Supreme Court. In the meantime, there is a temporary stay on the D.C. Circuit Court decision, so people currently receiving subsidies will continue to receive them, at least for a while," noted Klein.

The possibility that participants in federal exchanges may not be eligible for premium tax credit subsidies raises numerous questions about future implementation of PPACA. These include:

What actions might Congress take? "While some Congressional Democrats may seek legislation to clarify that subsidies are available in the federal exchanges, other Democrats may take the position that the law already allows it and no further legislation is needed. In any case, Congressional Republicans certainly would seek to block such legislation or pursue efforts to invalidate other elements of the law," said Klein.

What actions might the regulatory agencies take ? "The Obama Administration may conclude that delaying certain requirements for individuals, employers or other stakeholders is needed if judicial clarity is not forthcoming," noted Klein.

How will the states react? "Individuals are legally required to obtain coverage. Some states may feel pressure to establish their own exchange to ensure their citizens receive subsidies. Ironically, some states currently operating exchanges have contemplated opting for the federal exchange. Some states may also decide to expand Medicaid eligibility so that low income individuals will get some federal financial assistance. It is equally possible that other states will view the current uncertainty as a reason to hold back from making decisions," added Klein.

What does this mean for individuals? "If the lack of subsidy means that coverage is unaffordable for some people, those individuals may be exempt from the individual mandate penalty and may forego coverage. If healthy people do not participate in the exchanges the cost of coverage for those that do will rise," Klein pointed out.

What does this mean for employers? "Since the employer mandate penalty is triggered when employees receive a subsidy, some employers may be relieved of penalties, or may have different levels of penalties, depending on which states their workers reside. Also, some employers have considered whether their employees might be better served through steady coverage in exchanges, especially for workers that move from job to job. The lack of subsidies for workers in some states certainly would change the dynamics in that decision making.

"Uncertainty chills decision making. The courts need to quickly resolve this critical issue, one way or the other," Klein concluded.

For more information, or to arrange an interview with Council staff, please contact Jason Hammersla, Council director of communications, at or by phone at 202-289-6700 (office) or (202) 422-4652 (cell).

# # #

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.