A district court in the District of Columbia recently held that the Internal Revenue Service’s (“IRS”) rule authorizing premium tax credits to individuals who enroll in health-care coverage through federal exchanges was unambiguously consistent with the “text, structure, and purpose” of the Affordable Care Act (“ACA”). Halbig v. Sebelius, No. 13-cv-0623, 2014 U.S. Dist. LEXIS 4853 (D.D.C. Jan. 15, 2014).
The Exchanges, Premium Tax Credits, and Challenged IRS Rule
To facilitate the purchase of “minimum essential” health-insurance coverage (which the ACA requires that most Americans either obtain or pay a tax penalty for failing to do so (the “Individual Mandate”)), the ACA provides for the establishment of American Health Benefit Exchanges (“Exchanges”). As explained by the U.S. Department of Health and Human Services (“HHS”), the Exchanges act as “a mechanism for organizing the health insurance marketplace to help consumers and small businesses shop for coverage . . . .” Currently, sixteen states and the District of Columbia have elected to establish Exchanges (“State-run Exchanges”). Because the remaining thirty-four states have currently declined to do so, HHS has (pursuant to its authority under the ACA) stepped-in and created Exchanges on their behalf (“Federally-facilitated Exchanges”).