The Department of the Treasury and the Internal Revenue Service released new guidance that is “designed to expand the use of income annuities in 401(k) plans.”
A federal appeals court has upheld the use of insurance subsidies in states that did not operate their own exchanges under the federal healthcare law, a decision that stands in direct opposition to one handed down by the D.C. appeals court earlier Tuesday.
The Fourth Circuit Court of Appeals, in Richmond, Va., ruled unanimously Tuesday in favor of an interpretation of the law that allows subsidies in the 36 states that opted not to set up their own exchanges.
At issue is the part of the law that reads that subsidies would be available to those "enrolled through an Exchange established by the State."
Judge Roger Gregory, writing the opinion, says that in this case, "Exchange established by the State" could apply to just the individual markets set up in each state or to those exchanges set up by the Department of Health and Human Services on behalf of the state.
Citing the 1984 Supreme Court Case Chevron U.S.A. v. Natural Resources Defense Council, Gregory writes that in the event of ambiguous language subject to multiple interpretations, the agency responsible for carrying out the law -- in this case, the IRS -- may determine the appropriate interpretation "so long as it is based on a permissible construction of the statute."
"Having examined the plain language and context of the most relevant statutory sections, the context and structure of related provisions, and the legislative history of the Act, we are unable to say definitively that Congress limited the premium tax credits to individuals living in states with state-run Exchanges," Gregory writes. "Simply put, the statute is ambiguous and subject to at least two different interpretations. As a result, we are unable to resolve the case in either party's favor at the first step of the Chevron analysis."
Following the D.C. Circuit Court's 2-1 decision, the Obama administration announced it would appeal the decision it called "incorrect" and said people would continue to receive subsidies during appeal. It plans to ask for an "en banc" hearing, in which the full D.C. bench will weigh in on the decision, not just the three-judge panel that included two Republican-appointed judges.
"We believe that this decision is incorrect, inconsistent with congressional intent, different from previous rulings, and at odds with the goal of the law,'' Justice Department spokeswoman Emily Pierce said.
With two competing appeals court rulings, unless the full D.C. Circuit reverses its decision upon appeal, the case is almost certainly headed for the Supreme Court.
About 5.4 million people enrolled in insurance plans on the federal exchange, and some 87 percent received subsides that reduce the cost of monthly premiums by potentially hundreds of dollars.
King v. Burwell