In an important decision for the future of the Affordable Care Act the U.S. Supreme Court, in King v. Burwell, on Thursday upheld the Obama Administration’s interpretation of the law that premium subsidies to purchase health insurance are available to enrollees in the federal health insurance exchange as well as state exchanges.

Challengers had argued that IRS had misinterpreted the language of the 2010 law that subsidies are available for coverage purchased “through an Exchange established by the State,” and therefore that enrollees in the federal exchange were not eligible for subsidies.  

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Supreme Court Sides with President Obama: Premium Subsidies Available Nationwide

Fri Jun 26, 2015

In an important decision for the future of the Affordable Care Act the U.S. Supreme Court, in King v. Burwell, on Thursday upheld the Obama Administration’s interpretation of the law that premium subsidies to purchase health insurance are available to enrollees in the federal health insurance exchange as well as state exchanges.

Challengers had argued that IRS had misinterpreted the language of the 2010 law that subsidies are available for coverage purchased “through an Exchange established by the State,” and therefore that enrollees in the federal exchange were not eligible for subsidies.

In a 6-3 vote the majority of the Justices concluded that because the statutory text in question was “inartful,” “ambiguous,” and “limited,” it was necessary for the Court to look not only at the seven contested words but at the “broader structure of the Act”—in other words, whether IRS’s interpretation “is compatible with the rest of the law.”

Writing for the majority Chief Justice Roberts explained that the Affordable Care Act’s “statutory scheme compels the Court” to allow subsidies in all exchanges since to do otherwise would “destabilize the individual insurance market in any State with a Federal Exchange.” And finally, “It thus stands to reason that Congress meant for those provisions to apply in every State.”

Some Implications of King v. Burwell Decision—

(1) Subsidies have been upheld for exchange enrollees in all 50 states, including the 34 states that opted to use the federal exchange instead of establishing their own state exchange. Had the Supreme Court struck down federal exchange subsidies over 6 million people would have faced skyrocketing premiums.

(2) The Employer “play or pay” Mandate, including employer liability for penalties for failure to offer full-time employees minimum essential coverage or affordable and minimum value coverage—penalties triggered by premium subsidies—remains unchanged. Had federal subsidies been invalidated the ACA Employer Shared Responsibility provision would have been nullified in states using the federal exchange.

(3) The Individual Mandate to enroll in minimum essential coverage or face fines, which depends on the availability of premium subsidies to help pay for insurance coverage, remains in place as a result of the decision.

(4) The King v. Burwelldecision spotlights the centrality of premium tax credit subsidies to the functioning of the Affordable Care Act. Of the total 10.2 million people signed up for health insurance under the Affordable Care Act, 85% are receiving subsidies that cover on average about 72% of their monthly premium. In upholding premium subsidies for federal exchange enrollees the U.S. Supreme Court has validated the Affordable Care Act itself.

(5) Thursday’s Supreme Court decision means that the Affordable Care Act, colloquially known as Obamacare, remains the law of the land and likely will remain the law of the land after President Obama leaves office. Future presidents and congresses will find it difficult politically to roll back premium subsidies now that they have been upheld by the Supreme Court. Down the road, some Affordable Care Act changes are not only possible but likely. But President Obama is probably right in saying that the underlying law is here to stay.