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The Affordable Care Act Remains Intact: Subsidies Are Intended to Be Available For All

June 2015
Nicole Radziewicz, Esquire

On June 25, 2015 the United States Supreme Court issued its opinion in the case of King v. Burwell,  576 U.S. ___ (2015), affirming the availability of tax credits (or “subsidies”) to eligible citizens in all states under the Affordable Care Act (“ACA”), regardless of whether the state maintains a state or federally operated insurance exchange.  The ruling is significant because, had the Court ruled oppositely, both the individual and employer mandates would have been nullified in states opting for federally operated exchanges.

The Plaintiffs in the case, four private citizens of Virginia, challenged the ACA’s individual mandate (filing suit against Syliva Burwell, HHS Secretary), requiring that they purchase health insurance. The Plaintiffs argued that, under the plain language of the Act, tax credits for eligible individuals are only available in states with state-operated health insurance exchanges. Thus, in states with federally-operated exchanges, individuals like themselves (with income levels between 100 and 400% of the FPL), could not be required to purchase health insurance because, without the credits, the cost of insurance would exceed 8% of their incomes (the Act exempts persons from purchasing insurance if doing so would exceed 8% of individual income).

The plaintiffs relied on language stating that individuals are only eligible for subsidies if they enroll in insurance through, “an Exchange established by the State.” 42 U.S.C.A. § 18031 (West).

On appeal, the Supreme Court affirmed the rulings of the lower Courts, holding that subsidies are available in all states regardless of the structure of the exchange (albeit for different reasons). The high Court acknowledged that the Plaintiff’s plain language argument was strong, but the context and structure of the disputed language governed over the plain language in this case.

Firstly, the Court ruled that the phrase “an Exchange established by the State” was ambiguous. On one hand, the phrase could be limited to state exchanges. On the other hand, it could also refer to all exchanges because: “If a State chooses not to follow the directive … to establish an Exchange, the Act tells the Secretary of Health and Human Services to establish ‘such Exchange.’ §18041. And by using the words ‘such Exchange,’ the Act indicates that State and Federal Exchanges should be the same.” The presence of more than one interpretation established an ambiguity.

The Court then sought to resolve the ambiguity through looking to the broader structure of the Act to determine permissible meanings of the phrase. After examining the intent of Congress in passing the ACA, the Court rejected the Plaintiffs’ interpretation. The Court held that, adopting the Plaintiffs’ reading of the statute would destabilize the individual insurance market, because the Act would only work in states with state-operated exchanges. “The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral.” Further, the Court found significant that the statute states that all “applicable taxpayers” are eligible for subsidies. The Court ruled that this language would be nothing more than an empty promise under Plaintiffs’ interpretation. The Court held that Congress did not intend these results in passing the ACA.

Overall, the Court ruled that Congress’ intent was to provide subsidies in all states, whether they operate a state or federally operated-exchange. The Court described the disputed language as another example of “inartful drafting” contained in the Act. Consequently, under King v. Burwell, the Affordable Care Act remains intact, and subsidies are here to stay for all.