A federal appeals court on Tuesday dealt a setback to the Affordable Care Act, ruling that premium subsidies provided through the federal health exchange in 36 states are invalid under the writing of the law.
Here's the practical effect of the ruling, if it withstands the rest of the legal process: More than 5 million, generally low-income Americans who received tax credits through the federal exchange to purchase health insurance, would see their premiums explode.
Avalere Health, an independent healthcare firm, released an analysis last week showing that people who received premium subsidies for health insurance would see a premium hike of about 76% if courts ultimately rule they can't get tax credits through the federal exchange.
"The court case has major implications for future insurance coverage and access to care for millions of Americans," said Caroline Pearson, vice president at Avalere Health. "Depending on the ultimate decision by the courts and absent some other remedy, individuals in at least 25 states who remain in their current plans could see an average premium increase of over 70%."
The Obama administration said in May that about 87% of people who bought coverage in the 36 states served by the federal marketplace received subsidies. The potential effect of the Halbig decision would be even more pronounced in certain states — in Mississippi, for example, about 94% of people buying health insurance received federal subsidies.
Here's a map from Avalere showing the potential state-by-state effect:
For now, however, the Obama administration said the ruling would not affect premium subsidies while the administration initiates a review.
"We believe that this decision is incorrect, inconsistent with Congressional intent, different from previous rulings, and at odds with the goal of the law: to make health care affordable no matter where people live," Department of Justice spokeswoman Emily Pierce said in a statement. "The government will therefore immediately seek further review of the court’s decision. In the meantime, to be clear, people getting premium tax credits should know that nothing has changed, tax credits remain available."
A senior administration official told Business Insider that it would appeal the ruling to the full D.C. Circuit court, in which the full court would hear and decide on the case. The math for the administration is better in this situation — the appeals court is stacked with seven Democratic and four Republican appointees, four of which were appointed by Obama himself.
But even if the Obama administration prevails before the full D.C. Circuit, the case appears destined for the Supreme Court.
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