Insurance ruling won't cut off state, officials say

Tens of thousands of Arkansans will continue to receive federal tax credits to help pay their health insurance premiums despite a federal appeals court ruling Tuesday that found that only policies purchased on state-run exchanges qualify for the subsidies, state and federal officials said.

The 2-1 ruling by a panel of the U.S. Court of Appeals for the District of Columbia found that consumers in Arkansas and 35 other states with federally run health care exchanges do not qualify for the tax credit subsidies.

But in a 3-0 decision in a different case, the 4th Circuit U.S. Court of Appeals in Richmond, Va., reached the opposite conclusion.

U.S. Justice Department officials said they would appeal the Washington panel's decision to the full 11-member appeals court, and a White House spokesman said consumers would continue receiving the tax credit assistance.

Some legal observers expect the issue to eventually reach the U.S. Supreme Court.

In a statement, U.S. Rep. Tom Cotton, R-Dardanelle, who is campaigning to unseat U.S. Sen. Mark Pryor in the November election, called the Washington panel's ruling "the latest example of why we must start over on healthcare reform" and criticized Pryor for supporting the health care law.

"As a result of this court decision, we now know that the Obama administration has illegally spent billions of dollars on unlawful subsidies, for which American taxpayers will be asked to foot the bill," Cotton said. "This raises the serious question of whether or not Senator Pryor even read the Obamacare legislation prior to voting for it."

Pryor responded with a statement saying, "Cotton isn't leveling with Arkansans, and that's because he has no solutions except kicking 180,000 working Arkansans off of their private health care plans, raising taxes on nearly 40,000 more, and returning to the days where insurance companies denied coverage to Arkansans with pre-existing conditions."

Established in every state under the federal Patient Protection and Affordable Care Act, exchanges allow consumers to shop for health insurance and apply for subsidies to help them pay for it.

As of July 6, about 38,000 people who did not qualify for Medicaid were enrolled in coverage on Arkansas' exchange, according to the state Department of Insurance.

About 90 percent of those enrolled are receiving tax credit subsidies, Insurance Department spokesman Heather Haywood said.

Paid directly to an insurer to reduce the amount of the premium paid by the enrollee, the tax credits are available to people who don't qualify for Medicaid and have incomes of less than 400 percent of the federal poverty level: for example, $45,960 for an individual or $94,200 for a family of four.

To be eligible for the tax credits, an applicant cannot have access to employer-sponsored insurance that is considered affordable, meaning it would cost less than 9.5 percent of the employee's income.

Arkansas' private option, created by the Legislature, allows most people who qualify for coverage under the state's expanded Medicaid program to enroll in a plan on the exchange and have the premium paid by Medicaid.

More than 157,000 people were enrolled in the Medicaid-funded plans as of June 30.

Even if the Supreme Court threw out tax credit subsidies for states with federal exchanges, the private option plans would still be available, Arkansas Department of Human Services spokesman Kate Luck said.

Insurers are required to include private-option enrollees and others buying coverage on and outside the exchange in the same "risk pool," meaning their medical expenses are used to calculate future premiums.

In the long run, eliminating tax credit subsidies in the state would mean fewer healthy people would decide to buy coverage, QualChoice Health Insurance Chief Executive Officer Michael Stock said. That would mean insurers would need to charge higher premiums to pay for the cost of covering those who do buy coverage, he said.

If courts rule the tax credits were illegal, he added, that could mean those who received the assistance could owe money to the federal government.

Arkansas Insurance Commissioner Jay Bradford disagreed, saying he didn't think consumers would have to pay back the tax credits even if the Supreme Court ruled that they were not authorized, which he called a remote possibility.

He also noted that the Arkansas Health Insurance Marketplace, a nonprofit established by Act 1500 of 2013, is exploring the possibility of establishing a state-run exchange. The law authorizes the nonprofit to begin operating an exchange as soon as July 1, 2015.

"We are not sticking our heads in the sand on this issue," he said.

Arkansas Gov. Mike Beebe initially advocated for a state-run exchange but, citing opposition from the Republican-controlled Legislature, opted instead for a partnership agreement with the federal government.

Under the partnership, the federal government runs the exchange, with Arkansas handling some consumer assistance activities and helping to regulate the plans.

Sen. David Sanders, R-Little Rock and chairman of a legislative committee monitoring the Arkansas Health Insurance Marketplace, said it's too early to say how court rulings could affect the plans for a possible state-run exchange.

"We're following a very prudent process of figuring out what is in the best interests of the state," he said.

A Section on 07/23/2014

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