Appeals Court Ruling on Obamacare – 4.7 Million Could Lose Subsidies

by | Last updated Nov 15, 2023 | Published on Oct 31, 2014 | Healthcare News

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Obamacare witnessed a big day in court on July 22nd, 2014 as two federal appeals courts issued contradictory rulings related to a major provision of the Affordable Care Act (ACA). In Halbig v Burwell, a three-judge panel in Washington, DC ruled that “ACA does not empower the US government to help people purchase health insurance coverage, only states can do that”.

The ruling concluded that the ACA explicitly restricts subsidies to insurance purchased through exchanges established by the state. This new ruling would gut Obamacare in those 36 states that chose not to participate and the residents in those places will lose the federal support they anticipate to get if the ruling stands.

The actual provisions of the Affordable Care Act says that only those people who happen to purchase health benefit plans via an exchange established by the state can consecutively qualify for the subsidies. Yet, about 36 states chose not to set up their own exchanges leaving the entire work to the federal government. In May 2013, IRS issued a clarification of the law that reported that even people in those states could qualify for the same. This clarification was issued in adherence to the spirit of the law, which is to get the maximum number of people covered in an affordable manner.

The federal appeals court ruling was a stunning blow for the Obama administration and the healthcare reform law. Let’s take a look at the potential impact of this ruling by the numbers –

  • As per the latest estimate from the U.S. Department of Health and Human Services, out of the 5.4 million people who happened to purchase the health insurance via the this year, more than 87%, that is about 4.7 million people received premium tax credits in the federal market place. These are the proposed portion of people who would in turn lose their financial benefits under Obamacare (if the US appeals court ruling that invalidated the subsidies offered were to stand)
  • If the current enrollment pattern continues, about 14 million people are expected to receive federal subsidies by the end of 2017. As per the Congressional Budget Office estimates, the first year numbers minimize the impact since the total enrollment is expected to triple to 25 million in the next 3 years.
  • About 1.5 million people residing in Florida and Texas who happen to be the two biggest participants in the federal exchanges would lose subsidies. More than one third of these endowments offered to enrollees went to people in Florida and Texas. Wellness care providers in these states would face the highest number on uninsured people. This may in turn drive-up-costs for hospitals as they need to provide emergency care regardless of patient’s ability to pay.
  • Any individual who earns up to $ 46, 680 per year – 4 times the federal poverty level is eligible for subsidies. Hence, for a family of four the income threshold is $95,400.

One major question that arises at this point of time is what would happen to those people who are already receiving these benefits? Would they have to repay it? There is no clear-cut answer to this prominent question. Experts in this field doubt that the ruling would be retroactive and it may entirely depend on the final ruling.

The latest ruling does not have an immediate effect on the law as the Obama administration is likely to appeal the decision to the full appellate court. Experts view that if the decision is upheld, more than 250,000 firms in those states (which have more than 57 million workers) would not be subject to the employer mandate being phased in next year. Employers (with 50 or more full-time workers) will be pushed to provide affordable health insurance or pay a fine.

Julie Clements

Julie Clements, OSI’s Vice President of Operations, brings a diverse background in healthcare staffing and a robust six-year tenure as the Director of Sales and Marketing at a prestigious 4-star resort.

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