The Patient Protection and Affordable Care Act (ACA) relies on three primary strategies for expanding health insurance coverage. First, it regulates the insurance market to prevent practices that made it difficult or impossible for sick people to purchase insurance. Second, it expands Medicaid dramatically, particularly for childless adults. Third, it establishes in an individual “mandate,” which requires most people who were uninsured to purchase health insurance. To make the individual mandate affordable, the ACA included subsidies (in the form of IRS tax credits) for individuals with incomes below 400 percent of the federal poverty level.
In King v. Burwell, plaintiffs argued that the federal tax credits should only apply to health insurance exchanges (or “marketplaces,” as they are now called) established by states, not to those established by the federal Department of Health and Human Services. In a 6-3 decision, the Supreme Court upheld the use of federal tax credits for those purchasing health insurance through federal exchanges. If the Court had decided otherwise, more than 6 million people in 34 states would have become ineligible for tax credits, and probably most of them would have dropped the health insurance they purchased through the exchange. This would have destabilized the insurance markets and increased premiums for everyone living in those states.
Writing for the majority, Chief Justice Roberts acknowledged that the language in the statute “is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it is also possible that the phrase refers to all Exchanges—both State and Federal—at least for purposes of the tax credits.”
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