Your Obamacare Plan May Become Unaffordable

Obamacare has been slowly chipped away since its conception. In 2011, the Supreme Court allowed states to opt out of Medicare expansion. A month ago, the Supreme Court ruled that corporations with religious disagreements could opt out of the contraception mandate. This week, a 2^nd Circuit appeals court panel ruled that the IRS cannot extend tax credits to lower the cost of health insurance if the insurance was purchased through the federal government.

For example, let’s say we have a family of four in Illinois who make less than $94,200 a year. If this family signs up for health insurance through the federal government’s website, the IRS will give this family a $202 tax credit. This lowers their monthly premium from $316 to $114 a month. According to the 2^nd Circuit appeals panel in D.C., the IRS cannot give this tax credit because Obamacare says that only state run health insurance programs qualify for such tax credits.

So why can’t our hypothetical family buy insurance from the state of Illinois instead of the federal government? The problem is that Illinois, like thirty-five other states, were depending on the federal program to make healthcare affordable for their citizens. In other words, thirty-four states don’t have programs to sell health insurance that can take advantage of the tax subsidies.

Another appeals court, the 4^th Circuit, came to the opposite conclusion about Obamacare: the tax credits could be given through the federal program. When there’s a split among the circuit courts, the Supreme Court will typically hear the case. If the Supreme Court agrees with the 2^nd Circuit, then up to five million people could lose their tax credits. The Affordable Care Act would become unaffordable.

What Can I Do?

The 2^nd Circuit panel issued its ruling, but it has agreed to delay enforcement until the Obama administration appeals the decision. So if you have health insurance through the federal website, you will likely keep your tax credits for the remainder of 2014, if not 2015.

If you live in California, Colorado, Connecticut, District of Colombia, Hawaii, Kentucky, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, or Washington, you can register for health insurance through your state’s program. These 15 states and D.C. will offer the same tax credits that the federal programs currently use, so the residents of these states can sleep easy.

If you live in one of the other thirty-four states, you should write to your state legislator(s) about creating a state marketplace website. Writing to your Congressional representative might be an option, but it’s probably easier to create a state healthcare program than repealing Obamacare.

Finally, if the IRS are withholding your tax credit, you should contact a tax attorney. If you like your plan, you should fight to keep it.