Are tax credits allowed to buyers of health coverage on a federal exchange? The Supreme Court will decide.
The health care reform law says that people who buy insurance via a state-run exchange can get a credit if their household income is between 100% and 400% of the federal poverty level. But IRS rules also grant credits to qualifying people who buy coverage on an exchange run by the federal government. The Court will settle the dispute. Only 16 states and D.C. have their own exchanges.
A decision against the government could potentially gut the health reform law, because the millions of individuals receiving tax credits through a federal exchange would lose them, thus thwarting the law’s guarantee of affordable coverage for all. Also the resulting loss of participants on the exchange could crater the insurance markets.
The employer mandate could also be affected. This rule requires larger firms to offer their full-timers affordable insurance that meets minimum value or to pay a tax. An employer’s liability for the fine is tied to employees getting a credit for insurance bought on an exchange. If the Court says credits aren’t available for workers in states with federally run exchanges, the employer mandate would be substantially weakened.