Case to decide fate of 5 million PPACA subsidiesNews added by Benefits Pro on July 18, 2014

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By Alan Goforth

Nearly five million Americans could face massive health insurance premium hikes if a federal court rules against a provision of the Patient Protection and Affordable Care Act (PPACA).

The case, Halbig v. Burwell, currently is before the U.S. District Court of Appeals for the District of Columbia. If the court decides that consumers in the federal exchange are not eligible for premium subsidies, those consumers will see their premiums go up by an average of 76 percent, according to a study by Avalere Health.

See also: Administration says subsidies cut premiums by 76%

The PPACA states that subsidies must be administered "through an exchange established by the state." Only 14 states and the District of Columbia created their exchanges in time for the 2014 plan year. The lawsuit claims that the Internal Revenue Service overstepped its authority when it ruled in 2012 that the subsidies also include individuals who purchase coverage through the federally facilitated exchange.

“The court case has major implications for future insurance coverage and access to care for millions of Americans,” said Caroline Pearson, vice president of Avalere. “Depending on the ultimate decision by the courts and absent some other remedy, individuals in at least 25 states who remain in their current plans could see an average premium increase of over 70 percent.”

Eighty-seven percent of consumers who have purchased insurance through the federal exchange received subsidies that range as high as 94 percent.

Although two lower courts already have ruled in favor of the government, some experts speculate that the district court could rule for the plaintiff, which eventually could lead to consideration by the U.S. Supreme Court. The district court is expected to rule by the end of the summer.

See also: The potential to sink Obamacare?

“States, Congress and the administration will be under immense pressure to act to prevent large premium increases if the courts ultimately rule that individuals in federal exchanges are not eligible for tax credits,” said Elizabeth Carpenter, director of Avalere. “No doubt, the politics surrounding the Affordable Care Act will make any action difficult and could potentially make insurance unaffordable for millions of Americans who are already enrolled today.”

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