Supreme Court to hear key ACA case on insurance subsidies

BVWireIssue #146-2
November 12, 2014

Valuation experts in the healthcare arena have been following the ongoing soap opera concerning the Affordable Care Act’s provision that provides subsidies to individuals who buy health insurance through the new insurance exchanges. The outcome could have a huge impact on the financial picture of healthcare providers.

Showdown: The U.S. Supreme Court just announced it will hear King v. Burwell, a case that could leave millions of Americans uninsured and less likely to buy healthcare services. The key issue is whether individuals are entitled to the subsidy regardless of whether they buy insurance from a state-sponsored insurance exchange or federally sponsored exchange. The Obama administration feels the subsidy should apply to insurance purchased from either type of exchange.

Earlier this year, in Halbig v. Burwell, the U.S. Court of Appeals for the D.C. Circuit ruled that individuals who buy the insurance through a federal exchange are not entitled to the subsidy. But that decision was vacated in September when the D.C. Circuit Court decided to hear the case “en banc” (before the entire bench). That case is still pending. The 4th Circuit, in King v. Burwell, issued a contradictory ruling saying an individual who qualifies can receive the subsidy regardless of whether the insurance is purchased from a state-sponsored or federal exchange. The plaintiffs in the King case appealed to the Supreme Court.

Under the ACA, each state must establish a healthcare insurance exchange. States have the option to either form their own state-run exchange or partner with the exchange run by the federal government. To date, only 17 states have set up their own exchanges. Some experts feel that if the subsidy ends up not applying to federal exchanges, more states will set up their own.

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