The Affordable Care Act (ACA) survived a Supreme Court challenge in 2012, but federal judges in Washington D.C. and Virginia will hear a new challenge regarding the provision of subsidies on federally-run exchanges.
The text of the law states that people that purchase health insurance on an exchange “established by the state” will receive a subsidy. However, because several states, including Wisconsin, chose not to establish their own exchanges, the federal government runs the exchange. Thus, the courts must determine whether the ACA’s wording is a drafting mistake or eliminates subsidies for the 36 states with a federally-run exchange. Specifically, whether the IRS exceeded its authority when it issued a rule requiring federal exchange to provide subsidies.
The subsidies are a key provision of the law, making coverage affordable for the millions that will purchase on the exchange. Additionally, because penalties for large employers that do not provide health insurance only apply if an employee purchase coverage on the exchange with a subsidy, an employer may not be penalized for not providing health insurance coverage if no subsidies are provided on the federal exchange.
The Justice Department is arguing that the spirit of the law intended for subsidies to be available on federal exchanges. While libertarian and small business groups funding the litigation believe the law should be implemented as written.