On July 22, 2014, a panel of the United States Court of Appeals for the District of Columbia found in Halbig v. Burwell that subsidies could be awarded only in states that set up their own insurance exchanges.
The law "does not authorize the I.R.S. to provide tax credits for insurance purchased on federal exchanges," the panel said. The law, it said, "plainly makes subsidies available only on exchanges established by states."
If the ruling stands, it could cut off financial assistance for more than 4.5 million people who were found eligible for subsidized insurance in the federal exchange; it could also undercut enforcement of the requirement for most Americans to have insurance and the requirement for larger employers to offer it to their full-time employees.
Subsidies, in the form of tax credits, are a major element of the health care law. Without them, many more consumers would be unable to afford coverage and could be exempted from the "individual mandate" to have insurance.
The employer mandate is enforced through penalties imposed on employers if any of their workers receive subsidies, so it could become meaningless in states where subsidies were unavailable.
In the 36 states that used the federal insurance exchange this year, about 87 percent of people who signed up for private plans had incomes low enough to qualify for premium subsidies, according to the Department of Health and Human Services.
For a list of the states using the federal exchange, click here.
The Justice Department said the government would continue paying subsidies to insurance companies on behalf of consumers in the states that use the federal exchange, pending further review of the issue by federal courts.
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