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U.S. Supreme Court Will Hear Challenge to ACA Subsidies in Federal Exchanges

Several lawsuits have been filed in response to an Internal Revenue Service (IRS) rule authorizing subsidies in all states, including those with federally facilitated Exchanges (FFEs). These cases challenge the ability of the federal government to provide subsidies to individuals in states with FFEs. They argue that the IRS rule authorizing subsidies in all states conflicts with the text of the Affordable Care Act (ACA), and according to the law’s plain language, the ACA only authorized subsidies to be provided in states that have established their own Exchanges.

Despite pending cases, the Obama Administration indicated that federal subsidies will continue to be available to eligible individuals in all states, including those with FFEs. Going forward, the availability of subsidies may have significant implications for employers as a result of the ACA’s employer mandate. Under this mandate, if an employer does not offer coverage that meets certain requirements to its full-time employees, certain large employers may face penalties. However, penalties apply only if an employee receives a subsidy to buy coverage through an Exchange. If the subsidy is available only in state-based Exchanges, employers with employees solely in states with FFEs would not be subject to penalties.

Learn more by reading our Healthcare Reform Legislative Brief.