November 5, 2014
(Bloomberg) — Oklahoma won a court ruling striking down tax rules tied to the Patient Protection and Affordable Care Act, after a judge found they illegally punish states that didn’t establish health care exchanges.
U.S. District Judge Ronald White in Muskogee, Okla., last month denied a government request to throw out the 2011 lawsuit, in which the state claims Internal Revenue Service rules don’t follow the text of the PPACA statutes.
See also: ‘No immediate market change’ in subsidy court rulings
“Oklahoma challenged implementation of the Affordable Care Act after the IRS finalized a rule that would allow the federal government to punish ‘large employers’ including local government with millions of dollars of tax penalties in states without health care exchanges, which is not allowed under the health care law,” state Attorney General Scott Pruitt said last month.
Conflict of the courts
In July, two separate courts handed down contradictory rulings on the legality of PPACA’s legal subsidies.
On July 22, the U.S. Court of Appeals in Washington, D.C., ruled the government can’t give financial assistance to anyone buying coverage on the federal exchange, arguing Congress authorized payments only on state-run exchanges.
But hours later, a panel of three judges in Richmond, Va., ruled the opposite, concluding that while the language of the law is ambiguous, the IRS had the discretion to write rules for PPACA.
At the time, America’s Health Insurance Plans — as well as the National Association of Health Underwriters — said carriers and brokers should continue to stay the course, and not jump to any premature conclusions or changes.
“These issues typically take months or longer to be fully resolved by the courts,” said AHIP spokesman Brendan Buck. “In the meantime, health plans remain focused on ensuring stability, affordability and accessibility for consumers.”
Tuesday’s ruling is a legal setback for the Obama administration, and perhaps more evidence that the issue may be taken up to the Supreme Court.
It’s an issue widely affecting consumers: According to the Department of Health and Human Services, 5.4 million people selected a health plan on the federal exchange during 2014 enrollment (out of 8 million enrollees all told). And 85 percent of those consumers qualified for subsidies that reduced their premiums.
According to a Morning Consult survey out last month, 58 percent of registered voters think all subsidies under the Patient Protection and Affordable Care Act exchanges — whether they’re state or federal run — should be legal and available to enrollees. Only 15 percent disagreed and 27 percent said they didn’t have an opinion.