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U.S. Supreme Court Grants Review of ACA Case Involving Premium Subsidies Offered Through Federally Facilitated Exchanges?

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December 2014

The Supreme Court granted review in King v. Burwell, a Fourth Circuit case that upheld an IRS interpretation of statutory language in the Affordable Care Act that involves whether premium subsidies to purchase coverage should be available on federally facilitated ACA exchanges. Challengers argue that the IRS interpreted the ACA’s premium subsidy language too broadly; the IRS’s interpretation of the statute would limit the subsidy scheme only to exchanges established by a state. Many states have not established their own exchanges, which makes this a very significant issue.

Millions of individuals will no longer be eligible for premium subsidies to purchase exchange coverage if the Supreme Court overturns the Fourth Circuit’s decision, as more than 30 states have some form of federal exchange. Further, for employers, the ACA’s employer mandate/pay-or-play penalties are triggered only when an employee purchases coverage on an exchange and receives a premium subsidy. Depending on the outcome of the appeal, employers in states with federal exchanges (such as Illinois) may no longer need to be concerned about triggering employer mandate penalties for failing to offer coverage that meets the employer mandate’s various requirements. A decision is expected in 2015.

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