Americans are unlikely to lose Obamacare subsidies any time soon, at least not in most states.

A three-judge panel of a federal appeals court in Washington ruled July 22 that subsidies to help people pay insurance premiums are illegal in 36 states that use the federal system. The ruling, in a case brought by political opponents of the health law, rattled advocates who painted doomsday scenarios of broken insurance markets across the country.

That probably won’t happen, health-care industry executives and analysts said in interviews. The ruling is likely to be reversed, and even if it isn’t, a way to work around the court decision might be as simple as a bit of legislation in statehouses.

“We don’t expect disruption going into next year,” Karen Ignagni, president and chief executive officer of America’s Health Insurance Plans, a Washington lobby group for insurers, said yesterday in a phone interview. “It’s going to be many months if not years of further judicial review ahead before this is resolved.”

The issue centers on language in the Patient Protection and Affordable Care Act that appears to make subsidies for insurance premiums available only in states that run their own marketplaces for coverage, called exchanges. While Democrats who wrote the law expected most states to build their own exchanges, just 14 have done so. And at least two of those, Nevada and Oregon, hope to shut down their faulty sites and join next year.

IRS Ruling

The Internal Revenue Service ruled in May 2012 that subsidies were intended to be available everywhere. Opponents of the law living in 36 states using the federal exchange sued. Two judges on the Washington appellate court who were appointed by Republican presidents sided with the opponents, saying the letter of the law prohibits subsidies in federally run exchanges.

“There’s confusion today because the world generally wasn’t expecting it,” Robert Laszewski, an insurance industry consultant in Alexandria, Virginia, said in a phone interview. “It will subside pretty quickly. There’s not a great fear that this ruling is going to prevail, especially at the Supreme Court.”

Fitch Ratings said in a note to clients yesterday that confusion about the ruling and whether subsidies will remain available would mean lower enrollment in exchanges next year. Ignagni called that “an early rush to judgment” and said indications are that many people who didn’t sign up this year are interested in enrolling in 2015.

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