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Premium Subsidy Fight Creating Uncertainty for Hospitals, Health Plans

John Commins, for HealthLeaders Media, July 30, 2014

A pair of conflicting rulings regarding tax credits for those who buy health insurance on the federal marketplace is a "credit negative" for health plans and not-for-profit hospitals, Moody's Investors Service says.

Not-for-profit hospitals and health plans may feel the economic effects of the uncertainty created when two federal appellate courts last week issued conflicting opinions on a key provision of the Patent Protection and Affordable Care Act.

In a 2–1 ruling in Halbig v. Burwell, last week, judges on the D.C. Circuit Court of Appeals last Tuesday said that specific language in PPACA does not authorize the Internal Revenue Service to extend tax credits to an estimated 4.7 million people in 34 states who bought coverage through the federally facilitated Healthcare.gov exchange.

On the same day, the Fourth Circuit Court of Appeals in Virginia issued a conflicting ruling on essentially the same case, saying that the tax credits were legal. The case is expected to be heard by the U.S. Supreme Court.

The tax subsidies are a key provision of Obamacare that keeps health insurance affordable for millions of people, and the uncertainty created by the rulings is a "credit negative" for health plans and not-for-profit hospitals, Moody's Investors Service said.

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