Supreme Court Hears Arguments In Challenge To Health Care Premium Tax Credits

The Supreme Court on March 4 heard oral arguments in King v. Burwell, No. 14-114 (2015), which challenges whether taxpayers obtaining health insurance coverage through a federally established insurance exchange can use Section 36B premium tax credits. A successful challenge would eliminate credits for taxpayers in 37 states and would have larger implications for overall health care reform legislation and the excise taxes that employers face when their employees receive coverage.

Under Section 36B, the Affordable Care Act (ACA) created a new tax credit subsidy for certain taxpayers who obtain health insurance coverage under new state exchanges created by the law. The ACA also provided that if a state decided not to create an exchange, the federal government would create one instead.

Section 36B authorizes federal tax credit subsidies for health insurance coverage that is purchased through an "Exchange established by the State," but the IRS promulgated regulations under Treas. Reg. Sec. 1.36B-2 stating that the Section 36B credit is available to taxpayers who are enrolled in exchanges run by either the state or the federal government.

The petitioners who challenged the law and the IRS regulations argue that based on the statutory language of the ACA, the Section 36B credit is available to only those taxpayers who obtain health insurance through a state-established exchange and not a federal exchange. The government contested this, arguing that the IRS's interpretation of the statute was permissible.

A ruling against the IRS's interpretation would mean that taxpayers in the 37 states that have exchanges run by the federal government wouldn't qualify for credits. In...

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