Yesterday morning two US Court of Appeals issued conflicting opinions on whether the federal government may provide tax credits under the Affordable Care Act to purchase health insurance on insurance exchanges that are created and operated by the federal government rather than states. The US Court of Appeals for the District of Columbia Circuit held in a 2-1 opinion that tax credits may not be provided for such insurance, while the US Court of Appeals for the Fourth Circuit held the exact opposite in a 3-0 opinion.

This issue is important for employers as ACA’s employer mandate provisions, which penalize employers for not offering health coverage to their full time employees that is affordable and provides minimum value, are triggered only if at least some of the employees purchase coverage on an insurance exchange and receive a tax credit. Currently, the federal government operates the exchanges in 36 states.  Employers with employees only in those states would not face penalties for failing to comply with the employer mandate if the views of the DC Circuit ultimately prevail.  Media reports indicated the government was going to request the entire DC Circuit to rehear the case en banc. If the split between the circuits continues, we expect the US Supreme Court would grant cert.

Until the Supreme Court addresses the issue, employers that wish to avoid employer-mandate penalties should continue to operate under the assumption that tax credits will continue to be provided for policies that are purchased on the federal exchanges.  

Copies of each opinion can be accessed by clicking the following links:

Halbig v. Burwell

King v. Burwell