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Upcoming Federal Court Decision Could Mean Premium Increases for Nearly 5 Million Americans

July 17, 2014

The Halbig v. Burwell case before the U.S. District Court of Appeals could negatively impact millions of Americans who are benefiting from the Affordable Care Act (ACA).  A new analysis from Avalere Health finds that without action from the federal government nearly 5 million Americans would receive an average premium increase of 76 percent if the courts ultimately rule that consumers in the federal exchange cannot receive premium subsidies.

Halbig v. Burwell asserts that the Internal Revenue Service exceeded its authority in issuing a May 2012 rule that provides premium subsidies to individuals purchasing coverage through the federally facilitated exchange. While the ACA specifies that subsidies should be administered “through an exchange established by the state,” the law also gives the federal government the authority to establish an exchange on the state’s behalf. Only 14 states and the District of Columbia opted to create their own exchanges in time for the 2014 plan year.

“The court case has major implications for future insurance coverage and access to care for millions of Americans,” said Caroline Pearson, vice president at Avalere Health. “Depending on the ultimate decision by the courts and absent some other remedy, individuals in at least 25 states who remain in their current plans could see an average premium increase of over 70 percent.”

In the 36 states served by the federally facilitated exchange, on average, 87 percent of individuals who bought coverage received premium subsidies with a high of 94 percent in Mississippi. Meanwhile, federal premium subsidies reduce monthly premiums by an average of 76 percent across these states. Specifically, individuals receiving subsidies in Mississippi currently see their premiums reduced by an average of 95 percent.  Consumers in Florida, Alaska, Missouri, and Georgia received premium reductions of over 80 percent, on average.


Source: “Premium Affordability, Competition, and Choice, In the Health Insurance Marketplace, 2014.” Department of Health and Human Services, Assistant Secretary for Planning and Evaluation (ASPE), June 18, 2014.

Two lower courts have already ruled in favor of the federal government. However, some speculation suggests that the U.S. District Court of Appeals for the District of Columbia could rule contrary to the lower court decisions, opening the door for more legal action, including eventual consideration by the Supreme Court. The district court is expected to rule by the end of the summer.

“States, Congress, and the Administration will be under immense pressure to act to prevent large premium increases if the courts ultimately rule that individuals in federal exchanges are not eligible for tax credits,” said Elizabeth Carpenter, director at Avalere Health. “No doubt the politics surrounding the Affordable Care Act will make any action difficult and could potentially make insurance unaffordable for millions of Americans who are already enrolled today.”


Analysis assumes consumers do not switch plans following ruling. Loss of subsidies would be considered a qualifying event, and therefore consumers would have the option to select a less-expensive plan.

While Idaho and New Mexico are considered state-based exchanges by HHS, both relied heavily on federal infrastructure for 2014 and are included in ASPE’s calculations. Therefore, both states appear with premium increases in the figure above, but are considered state-based for the purposes of counting the number of states setting up an exchange.

Premium increases are based on “Premium Affordability, Competition, and Choice, In the Health Insurance Marketplace, 2014,” HHS / ASPE, June 18, 2014. The number of individuals who would be impacted by the ruling was calculated using the percent of enrollees in the federal exchange that are being subsidized (87 percent) from the June 2014 report and total enrollment (5.45M) from  “Health Insurance Marketplace: Summary Enrollment Report For The Initial Annual Open Enrollment Period,” HHS / ASPE, May 1, 2014.