Court Ruling Guts Obamacare Subsidies in PA

Back in 2012, many laughed at the idea of challenging Obamacare’s individual and employer mandates by arguing that the law as written allows subsidies for insurance in state exchanges only. Laugh no more: Today the U.S. Court of Appeals for the D.C. Circuit ruled the IRS could not provide tax credits or subsidies to individuals with insurance policies purchased on a federal exchange.

The prohibitions would apply to Pennsylvania and 35 other states that do not have state exchanges under Obamacare. 

If the case reaches the Supreme Court and court rules in Halbig’s favor, subsidies on federal exchanges will be illegal.

What does that mean in practice? It means an estimated 357,000 Pennsylvania residents will be free from the individual mandate tax. In addition, 15,000 employers with 3.9 million workers will be free of the employer mandate.

The reasoning is a little complicated. Under the employer mandate, employers can only be fined when their employee gets a subsidy from the exchange. Similarly, an individual can only be fined if the cost of their insurance would be less than 8 percent of their income after subsidies. Without subsidies, more people qualify for the affordability exemption and employers have no penalty.  

If the ruling is upheld, many will argue that the court is taking away tax credits, but in reality the blame lies with the Obama administration and the IRS which moved forward with doling out taxpayer funds in violation of the Affordable Care Act. Effectively the ruling means that the cost of insurance will no longer be shifted onto taxpayers, and the more than 20 new taxes created as part of Obamacare.

The fact is the Obama administration has been violating its own health care law to impose new burdens on Pennsylvania residents and a new tax on employers. It’s time for the administration to start implementing the law as written.