Judge rules against health insurance subsidies for federal exchanges

October 3, 2014

A federal judge in Oklahoma has ruled that subsidies paid to people who purchased a health plan through the federal healthcare exchange established under the ACA are invalid.

A federal judge in Oklahoma has ruled that subsidies paid to people who purchased a health plan through the federal healthcare exchange established under the Affordable Care Act (ACA) are invalid.

The ruling stemmed from a lawsuit brought against the ACA by Oklahoma Attorney General Scott Pruitt. He said in a statement that “The administration and its bureaucrats in the IRS handed out billions in illegal tax credits and subsidies and vastly expanded the reach of the health care law because they didn’t like the way Congress wrote the Affordable Care Act.”

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The ruling marks another chapter in the tortuous life of the ACA, which has been subjected to lawsuits and other legal challenges since its inception. Other federal courts in Richmond, Virginia, and Washington, D.C., have heard appeals and issued conflicting rulings, with the Richmond court upholding the legality of the subsidies. A three-judge panel in Washington, D.C. initially ruled against the subsidies, but that decision was vacated after the full court reheard the case.

The conflicting rulings mean the case is likely headed to the U.S. Supreme Court.

Elimination of the subsidies would be a major blow to the ACA and to millions of patients from 36 states who purchased insurance on the federal exchange and who could see their premiums rise drastically as a result. The ruling does not impact exchange customers in the state-run exchanges.

Premium subsidies are a cornerstone of the ACA and are a key piece of enabling uninsured Americans to afford health insurance. Individual insurance customers who earn up to $45,960, and families of four who earn up to $94,200 are eligible for subsidies, according to government figures.

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