Supreme Court upholds health care subsidies in states without exchanges

On June 25, the U.S. Supreme Court ruled 6 to 3 in King v. Burwell, stipulating that the Internal Revenue Service may extend tax credits and premium subsidies for health insurance to consumers who purchase insurance through state or federal exchanges under the Affordable Care Act.

The court began hearing oral arguments for King v. Burwell in early March.

The plaintiff, David King, a Vietnam veteran from Virginia, was eligible to purchase health insurance with a monthly premium of $648 for $275; the remaining $373 was to be covered by a subsidy. However, King expressed a desire not to have the subsidy or buy any health insurance, according to Amy Howe of SCOTUSblog.

The defendant is Sylvia Mathews Burwell, Secretary of Health and Human Services.

King and three other Virginia residents filed a lawsuit challenging the government’s interpretation of the ACA to allow subsidies for anyone who purchases health insurance through an exchange. The lower federal courts rejected their argument, and in November 2014, the Supreme Court agreed to hear the case.

Suit contention ‘implausible’

Chief Justice John Roberts delivered the majority opinion, which was shared by Justices Anthony Kennedy, Ruth Bader Ginsberg, Sonia Sotomayor, Stephen Breyer and Elena Kagan.

Justice Antonin Scalia delivered the dissenting opinion and was joined by Justices Samuel Alito Jr. and Clarence Thomas.

“The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral,” Roberts wrote. “It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation, but those requirements only work when combined with the coverage requirement and tax credits. It thus stands to reason that Congress meant for those provisions to apply in every State as well.”

Roberts continued: “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.”

Dissenting opinion

In the dissenting opinion, Scalia characterized the ruling as “not merely unnatural; it is unheard of.”

“Who would ever have dreamt that ‘Exchange established by the State’ means ‘Exchange established by the State or the Federal Government?’” Scalia wrote. “Little short of an express statutory definition could justify adopting this singular reading.”

Scalia continued: “Worst of all for the repute of today’s decision, the Court’s reasoning is largely self-defeating. The Court predicts that making tax credits unavailable in States that do not set up their own Exchanges would cause disastrous economic consequences there. If that is so, however, wouldn’t one expect States to react by setting up their own Exchanges? And wouldn’t that outcome satisfy two of the Act’s goals rather than just one: enabling the Act’s reforms to work and promoting state involvement in the Act’s implementation?”

After the ruling, Howe noted that a decision in favor of the plaintiff would have had far-reaching political and economic consequences.

“A ruling for the challengers today could have had effects far beyond the insurance markets and the wallets of people who would no longer receive subsidies: it almost certainly would have carried over into both the political arena — as the people who could no longer afford health insurance directed their frustration at elected officials — and the stock market,” Howe wrote.

In 2012, the Supreme Court upheld a provision of the ACA requiring everyone to purchase health insurance or pay a fee or penalty.

ADA response

The American Diabetes Association applauded the ruling.

In January, the ADA, together with the American Cancer Society, American Cancer Society Cancer Action Network and National Multiple Sclerosis Society, filed an amicus brief in the case supporting tax credits regardless of exchange type, noting that uninsured patients are at twice the risk for diabetic complications as patients with health insurance.

In a statement following the announcement, ADA CEO Kevin L. Hagan said, “Congress responded to gaping holes in the health insurance system that left millions of people — particularly those affected by serious chronic conditions like diabetes — unable to afford health coverage, likely to face overwhelming health care costs and dangerously susceptible to illness and disability. We cannot significantly improve access to quality, affordable health coverage unless federal financial assistance is available in federal and state marketplaces nationwide.” – by Matt Hasson and Jill Rollet

Disclosure: The researchers report no relevant financial disclosures.