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U.S. Court in Oklahoma rules against ACA subsidies on federal exchange

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U.S. Court in Oklahoma rules against ACA subsidies on federal exchange

Another federal court judge has ruled that the Internal Revenue Service overstepped its authority in 2012 rules authorizing government health insurance premium subsides for lower-income individuals to use to purchase coverage in federal and state health insurance exchanges.

“The court is upholding the” Patient Protection and Affordable Care Act “as written,” said U.S. District Judge Ronald White of the Eastern District of Oklahoma, in ruling that the law only permits premium subsidies in exchanges established by states.

The IRS premium subsidy rules are “arbitrary, capricious, an abuse of discretion or otherwise not in accordance with the law,” Judge White wrote, in affirming a challenge to the rules earlier filed by Oklahoma Attorney General Scott Pruitt.

Judge White's ruling is the first since two appeals courts in July handed down conflicting decisions on whether the ACA authorized premium subsidies in federal and state exchanges.

In that first ruling, a three-judge panel of the U.S. Court of Appeals for the District of Columbia ruled that the law “unambiguously” limits premium subsidies to exchanges established by states. However, that 2-1 decision is now being reviewed by the full appeals court, which has scheduled a hearing Dec. 17.

In the second ruling, the 4th U.S. Circuit Court of Appeals in Richmond, Virginia, said the IRS was within its authority in issuing rules authorizing premium subsidies in both federal and state exchanges. While the reform law's language is “ambiguous and subject to multiple interpretations,” the court is required to defer to the IRS' interpretation of the statute as a permissible use of its regulatory discretion, the appeals court panel ruled.

The outcome of the court cases—resolving whether government premium subsidies are available for coverage purchased in the federal exchange could have a huge bearing on the ability of the ACA to reduce the number of uninsured.

In May, the Department of Health and Human Services reported that of the 8 million Americans who enrolled in public exchanges, more than 5.4 million opted for health plans offered in the 36 states where the federal government is running exchanges, with more than 85% of enrollees uninsured at the time they applied for coverage.

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