Supreme Court Upholds ACA Subsidies On Federal Exchanges

This is the 51st in a series of WorkCite articles concerning the Patient Protection and Affordable Care Act and its companion statute, the Health Care and Education Reconciliation Act of 2010 (referred to collectively as the ACA). The Supreme Court's highly anticipated decision in King v. Burwell, 576 U.S. __, ___(2015), confirms the availability of tax subsidies for individuals who purchase their health insurance on an exchange created by the federal government, continuing the ability of eligible individuals in 37 states to obtain subsidies despite the lack of a state exchange.

The question before the Supreme Court was whether Internal Revenue Service regulations could extend tax-credit subsidies to health insurance coverage purchased through exchanges established by the federal government when Section 36B(b)(2)(A) of the Internal Revenue Code appears to limit those subsidies to coverage purchased “through an Exchange established by the State[.]”

Concern that three-quarters of current exchanges might be unable to offer subsidies − and that more than six million individuals would lose subsidized insurance − prompted several groups to file amicus briefs in support of the IRS regulation, including briefs from 22 states (most of which have state exchanges), members of Congress, state legislatures and associations representing health insurers, physicians and hospitals. Because employer-mandate penalties apply only where an employee obtains a subsidy, a decision limiting subsidies to state exchanges would also have impacted potential ACA employer penalties.

The majority opinion, written by Chief Justice Roberts, showed deference to the congressional purpose of the ACA:

A fair reading of legislation demands a fair understanding of the legislative plan. Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Id. (slip op., at p.21)

What Was in Dispute?

The ACA provides subsidies for people who buy their health insurance through an exchange. One provision of the ACA indicates that the subsidies are available only if you purchase your health insurance on an exchangeestablished by the State. The plaintiffs in King v. Burwell argued that subsidies are not available if you purchase health insurance on the federally established health exchange, Healthcare.gov. The federal government argued that, if...