A ruling today states that the provision in Obamacare that says those enrolling in health insurance exchanges "established by the State" are not eligible for government subsidies to help pay for premiums. The court ruling is in contrast to a previous rule created by the IRS that attempted to reverse this very specific provision.
A federal court on Tuesday struck down a rule from the Internal Revenue Service making Americans in federally run health insurance marketplaces eligible for subsidies, a decision that could seriously imperil implementation of the Affordable Care Act….
Lawmakers drafted the Affordable Care Act so that if a state did not set up a health insurance marketplace – known as “exchanges” – the federal government would do so in its stead. But shortly after the first major challenge to the law’s insurance mandate failed, opponents of the law began arguing that Americans participating in the federally run exchanges were ineligible for subsidies meant to help working and middle class Americans purchase health insurance. Thirty-six mostly Republican run states have opted not to build exchanges.
“If the D.C. Circuit’s opinion stands, it will be a devastating blow to Obamacare. It would cripple the law in the 36 states with federal exchanges,” said Adam Winkler, a law professor at UCLA.
Cato Institute's Michael Cannon has an excellent overview of the case here, including the notion that those states that did not establish an exchange not only would not be eligible for subsidies, their citizens would not be subject to the taxes levied on those not complying with the individual mandate.
This ruling shows why it was so important for NC to refuse to set up an exchange, and if it stands will serve a crippling blow to Obamacare.
The Obama administration will appeal the decision.