Employee Benefits Update - August 2014

Circuit Courts Split on Whether Federal Government May Grant Premium Subsidies in Federal Exchanges

On July 22, 2014, two federal circuit courts issued conflicting decisions regarding whether the federal government may grant premium tax credits in federal Exchanges established under the Affordable Care Act ("ACA"). In a 2-1 decision, the District of Columbia Circuit Court of Appeals in Halbig v. Burwell held that the plain meaning of the relevant statute authorizing premium tax credits is based on the cost of coverage obtained "through an Exchange established by the State." Because federal Exchanges are not established by the states, the D.C. Circuit held the federal government may not grant premium tax credits in these Exchanges under the statute. However, in a 3-0 decision, the Fourth Circuit Court of Appeals in King v. Burwell held that the same statute, when viewed in light of ACA's policy goals, structure and related provisions, created an ambiguity that the