Two U.S. Courts of Appeals recently issued conflicting rulings on a major provision of the Affordable Care Act (ACA), and the U.S. Supreme Court is being asked to weigh in. The concern is over the Internal Revenue Service’s decision to extend insurance premium subsidies to all Insurance Exchanges regardless of whether they are State-based or Federally- facilitated.

Enacted as part of the ACA, Section 36B of the Internal Revenue Code makes tax credits available as a form of subsidy to individuals who purchase health insurance through Exchanges that are “established by the state under section 1311” of the ACA. In a regulation promulgated on May 23, 2012 (the “IRS Rule”), the IRS interpreted this section to allow credits for insurance purchased on either a State-based or a Federally-facilitated Exchange. The IRS Rule gives the ACA broader effect than it would have if the tax credits were limited to State-based Exchanges.