Obamacare survives a second Supreme Court challenge

The Affordable Care Act has survived its latest legal challenge. After reading the Supreme Court's recent decision in King v. Burwell, Dan Shaffer of the AACU discusses how the justices arrived at it and what it means to you.

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For the second time in 3 years, the Affordable Care Act (ACA) survived a challenge before the U.S. Supreme Court. In a 6-3 decision, the Court in King v. Burwell upheld a tax code provision that authorizes tax credit subsidies for health insurance purchased on federal exchanges.

Thirty-four states have not established their own state exchanges and have instead opted for the federal government to establish one for them. Like the health insurance mandate upheld by the Court 5-4 in National Federation of Independent Business v. Sebelius, health insurance subsidies are an important component of the framework used by the ACA to insure more Americans, and many were concerned what would happen if the Court disallowed subsidies in these 34 states.

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At the heart of the case was the phrase, “exchanges established by the State” and its meaning in the section of the ACA establishing the formula for calculating health insurance subsidies. Those challenging the subsidies argued that the section’s language limits subsidies to those “exchanges established by the State,” emphasizing how that phrase is used in two key provisions of the section. Accordingly, they argued, the Internal Revenue Service did not have authority to implement a regulation allowing for subsidies in states with a federal exchange.

Supporters of the subsides argued that the challengers’ reading of the ACA was too narrow and that the section needs to be examined from a broader perspective, taking into account other provisions of the ACA and the purpose of the act as a whole.

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Justice Roberts, writing for the majority, essentially sided with the supporters. Pointing to other sections and provisions of the ACA, he reasoned that the meaning of the phrase, “exchanges established by the State,” is not as clear as the challengers contend, and that in light of the ACA’s overall statutory scheme and purpose, the IRS has the authority to grant subsidies in states with federal exchanges. In so reasoning, he noted that the interpretation suggested by the challengers could lead to a health insurance “death spiral,” highlighting one study that predicted premiums would increase by 47% and enrollments decrease by 70% if the subsidies were not allowed in states with federal exchanges.

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Justice Scalia, writing for the dissent, began by calling the majority’s holding “absurd” and went on to explain how the majority’s reasoning is contrary to long-established rules of statutory interpretation. “[N]ormal rules of interpretation,” he wrote, “seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved.” Justices Alito and Thomas joined in the dissent.

The most immediate impact of the Court’s ruling in King v. Burwell is that the ACA remains intact. Going forward, some believe that given the availability of subsidies in all states, regardless of the type of exchange, the decision might mean the end of further attempts by states to establish their own exchanges or result in some states deciding to forgo their own state exchanges and opt for a federal exchange, as reported in Modern Healthcare.

Opponents of the ACA have vowed to keep fighting. In discussing the decision on Face the Nation, Representative Paul Ryan (R-WI-1), chair of the House Ways and Means Committee, asserted that the ACA will collapse under its own weight and that Republicans will continue to work toward its repeal and replacement.

So the ACA survives, but the debate continues. Based on its two ACA decisions, it seems apparent that the Supreme Court will not settle that debate judicially, and that any major changes to the ACA will have to come about legislatively.