Affordable Care Act: The Supreme Court Rules In Favor Of Subsidies



On June 25, 2015, the Supreme Court upheld the availability of tax credits (subsidies) in all 50 states under the Affordable Care Act. The court affirmed in a 6 – 3 vote that the language in the Affordable Care Act allows the government to help people buy insurance (through subsidies or tax credits) anywhere in the country and not only in states that have established their own insurance exchanges, or Marketplaces. Chief Justice John Roberts wrote for the majority. Justices Scalia, Thomas, and Alito dissented.

The King vs. Burwell case has been in the news for months and there has been much speculation about the potential outcome of the Court’s decision. Only 13 states have established and operate their own exchanges so billions of dollars of federal subsidies were at stake for residents in the other states that did not establish full state-run exchanges.

A key section of the majority opinion concluded:

“When read in context, the phrase ‘an Exchange established by the State under [42 U.S.C. Section 18031]’ is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it could also refer to all Exchanges — both State and Federal — for purposes of the tax credits…. The argument that the phrase ‘established by the State’ would be superfluous if Congress meant to extend tax credits to both State and Federal Exchanges is unpersuasive…. [T]he statutory scheme compels the Court to reject petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid…. Petitioners’ plain-meaning arguments are strong, but the Act’s context and structure compel the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.” [King v. Burwell, No. 14-114 (U.S. June 25, 2015]

With this ruling and the subsidies remaining intact, it is business as usual and nothing changes as the provisions of the Affordable Care Act continue to be implemented.



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