The case was brought by a group of individuals and small businesses that argue that the Affordable Care Act only allows the government to give insurance subsidies, which come in the form of tax credits, to people in states that have set up their own health insurance marketplaces. They say that Washington cannot dole out the subsidies to people in the 36 states who use a government exchange to shop for insurance.
People in those three-dozen states who won’t be able to afford insurance without the subsidies should be exempted from federal tax penalties for not having it, the plaintiffs say.
That would put them in the same category as people in states that are not expanding Medicaid. In those states, people who would otherwise be eligible for the expanded government health program will not be penalized for going without insurance.
He did deny a preliminary injunction, however, that would have immediately stopped federal health insurance subsidies in states that are relying on marketplaces set up by the federal government.
“We are hopeful the forthcoming ruling will invalidate the attempt by the IRS to eliminate the distinction between states that participate in the insurance exchange program and those that do not,” said a statement from Sam Kazman, general counsel for the Competitive Enterprise Institute, which is helping to coordinate the case.
The Obama administration has maintained that the subsidies can be handed out to people using any insurance exchange, state-based or federal. Any language that seems to restrict it to state-based exchanges, they add, is because lawmakers assumed all states would want to run their own when they wrote the law.
Federal subsidies are available to people making up to four times the federal poverty level, which is about $78,000 for a family of three.
The case is Halbig v. Sebelius.