Supreme Court Affirms ACA Subsidies in King v. Burwell

In a win for the Affordable Care Act (ACA), the Supreme Court today ruled 6-3 that tax subsidies will be provided to all individuals who purchase health insurance, regardless of whether the plans were bought on a marketplace created by a state or the federal government.

Those who ruled in favor of upholding the ACA subsidies were Chief Justice John Roberts and Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

The King v. Burwell case called into question the interpretation of 6 words in the ACA: “an Exchange established by the State.”

By way of context, attorney Michael Carvin had argued on behalf of 4 clients, including a Virginia man named David King, who would rather not have to buy health insurance. Reading “an Exchange established by the State,” Carvin and his clients believed that the subsidies defined in the ACA are only relevant to states that set up their own exchanges, which Virginia did not.

With a subsidy, King’s health insurance would cost him $373. If there were no subsidies for residents who live in states that did not establish an exchange, however, his income would allow him to be exempt from the individual mandate. In other words, he would not be fined for not having health insurance.

According to HealthCare.gov, an individual can be exempt if the cheapest health insurance plan available via a marketplace or a job would cost more than 8% of his or her income.

Justice Sotomayor had also suggested in March that Carvin’s interpretation of the law would permit a “death spiral.” In other words, with no subsidies for residents in states that did not establish exchanges, residents would not be required to buy health insurance.

Since insurers have to offer insurance to everyone, only the sickest would be willing to buy health insurance. This would lead insurance costs to skyrocket, which would then cause more individuals to drop out. Eventually, states would be forced to set up their own exchanges, which some claimed would be too coercive that it might violate the Constitution.

“Petitioners’ plain-meaning arguments are strong, but the act’s context and structure compel the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the act,” Chief Justice Roberts wrote in the Supreme Court opinion. “Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.”

If the plaintiffs in King v. Burwell had won, more than 6.4 million individuals who bought their health insurance on the federally run marketplace would have seen their premiums triple, according to The New York Times.