Future of ACA Subsidies in Texas Unclear After Rulings

Opposing rulings from two federal courts Tuesday left unclear the future prospects of federal financial aid to Texans who qualify for assistance to purchase health insurance under the Affordable Care Act.

The U.S. Court of Appeals for the D.C. Circuit ruled that the ACA legislation made federal subsidies available only to individuals who purchased insurance through state-run exchanges. That would make federal subsidies illegal in the 36 states, including Texas, that use the federally facilitated insurance marketplace.

That announcement was followed by a decision from the 4th Circuit Court of Appeals in Virginia, which ruled that individuals who enroll using federally facilitated exchanges are eligible to receive subsidies.

Texas, like dozens of other states with Republican leaders, declined to create its own state-based insurance exchange under the ACA. Instead, Texas relies on a federally managed marketplace. More than 730,000 Texans enrolled for health coverage through the federal marketplace during the first period of open enrollment.

As part of the federal health reform law, most people are required to purchase health insurance this year or face tax penalties. The federal government is paying part of the bill for the 84 percent of the Texans who purchased coverage through the federal exchange and qualified for subsidies. Those people are receiving $233 in monthly tax credits, according to the U.S. Department of Health and Human Services.

Despite the 2-1 ruling from the three-judge panel in D.C., the Obama administration has said that individuals who accepted federal subsidies will continue to receive financial assistance. Federal attorneys are expected to appeal the ruling to the full 11-member D.C. Circuit Court, which includes seven Democratic appointees and four Republican appointees.

If the courts decide that subsidies are legal for only those enrolled in state-run exchanges, federal lawmakers could pass legislation to authorize subsidies for enrollees on the federal exchange.

But the Texas congressional delegation, which is mostly Republican, has been fiercely opposed to the federal health reform law. U.S. Sen. Ted Cruz, R-Texas, called the D.C. Circuit Court ruling a “repudiation of Obamacare” and its “lawlessness.”

At the state level, Texas’ Republican leaders have also staunchly opposed the ACA since it was passed in 2009, rejecting both a call to expand Medicaid eligibility for young adults and a call to create a state-run insurance exchange.

If the courts rule that those who enroll in the federal marketplace are not eligible for subsidies, state legislators would have to decide whether to create a state-run exchange so that Texans would qualify for the subsidies, said Stephanie Goodman, spokeswoman for Texas’ Health and Human Services Commission.

“This case is a long way from settled, but there are several options if the federal exchange is ultimately struck down,” Goodman said in an email.

Gov. Rick Perry’s office did not respond to a request for comment on whether he would consider launching a state-run marketplace if the courts rule against subsidies for federal marketplace enrollees.

Opponents of health care reform in Texas have previously cited the subsidies as a reason for generally low enrollment in a state where roughly a quarter of the population is uninsured. They have argued that Texans are apprehensive about accepting the subsidies, which are based on income, because they may be required to return the money if their income changes.

Individuals whose annual incomes range from one to four times the federal poverty level — $11,490 to $45,960 for an individual and $23,550 to $94,200 for a family of four — typically qualify for the subsidies.

Christine Sinatra, state spokeswoman for Enroll America, which has worked to enroll individuals in the federal marketplace, said the availability of financial assistance was “obviously a big factor” for that encouraged many in Texas to get insurance.

“What’s most important at this stage is for consumers to know that no one will lose their coverage or their financial help while this judicial process plays out,” Sinatra said. “And today’s decision isn’t making anyone newly uninsured.”

This story was produced in partnership with Kaiser Health News, an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.