The Supreme Court will hear King vs. Burwell in the early months of 2015 and its decision could have a substantial impact on the new healthcare mandate. The case will determine which individuals are eligible to receive the Premium Tax Credit. This credit is currently available to individuals that purchase their health care through a state or federal exchange and that meet certain income and filing requirements. However, case challenges the current interpretation of the Affordable Care Act, threatening to limit the eligibility of the tax credit to individuals who purchase health care through a state exchange, rather than a federal exchange.
King vs. Burwell was originally heard by the 4th Circuit Court in Richmond, Virginia and the court determined that individuals who purchased health insurance on a state or federal exchange were eligible for the tax credit. If the Supreme Court upholds this decision, there will be no reason for the IRS to amend the regulation. However, the Supreme Court could find the ruling invalid and limit the tax credit to those plans purchased on state-based exchanges only*. If this occurs, it will disallow all of the subsidies received by taxpayers who purchased plans on federal exchanges, making it unaffordable for some to continue with the coverage. This is a major case and the decision could have a considerable effect on the Affordable Care Act.
*For 2015, the 13 states that offer state-based exchanges: California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, New York, Rhode Island, Vermont and Washington