Supreme Court Upholds ACA Subsidies in Federal Exchanges

The Supreme Court announced Thursday, June 25, its ruling in King v. Burwell, finding for the Administration that the tax subsidies created by the ACA are not limited to state exchanges. This means that citizens of the 34 states with federal exchanges will not lose the tax subsidies that allow them to purchase insurance. The case was decided 6-3, with Chief Justice Roberts writing the opinion while three conservative members of the bench – Scalia, Thomas and Alito – dissented. This is the second time in three years that Chief Justice Roberts has penned an opinion saving the ACA. In 2012, he was the author and deciding vote in a ruling upholding the individual mandate under Constitutionally-prescribed powers of interstate commerce.

At issue in this case was whether four words in the ACA, “established by a state”, limit subsidies to citizens of states that set up their own exchanges. Arguments on either side boiled down to a question of textualism vs. Congressional intent, with petitioners arguing that the letter of the law is clear and federal exchanges do not qualify for subsidies. The Court however was not moved by this argument, and, while rejecting use of Chevron in this case, based their decision to uphold the subsidies on the context of the law, “looking to the broader structure of the Act”. Roberts writes: “The combination of no tax credits, and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner.”

The ruling, a huge win for President Obama, in effect means business can continue as usual, however it will impact Republicans’ piecemeal and wholesale approaches to dismantling the ACA. Leading up to the decision, it was reported that Republicans became increasingly concerned that a holding for the petitioners would reflect poorly on the party. Studies leading up to the much-watched case predicted that upwards of eight million people could lose their subsidies, and subsequently insurance, were the Court to side with the petitioners. To counter this potential fallout, Republicans in the House and Senate have been preparing and advertising “fixes” to the subsidy elimination, suggesting that such plans could be attached to bills like the proposed repeal of the medical device tax.

The opinion can be found here.