Client Alerts
June 26, 2015

Summary of the Supreme Court ruling on the Affordable Care Act

Stites & Harbison Client Alert, June 26, 2015

On June 25, 2015 the United States Supreme Court announced its much anticipated decision to uphold the legality of health insurance subsidies for individuals participating in both federal and state-run insurance exchanges. In a 6-3 decision written by Chief Justice John Roberts, the Court held that the Affordable Care Act did not restrict tax subsidies that help millions of low and moderate income people afford private health insurance only to states that established their own online health insurance exchanges.

The plaintiffs in David King, et al. v. Sylvia Burwell, Secretary of Health and Human Services, et al. argued that the IRS’s health insurance premium tax credit rule, which gives the IRS authority to grant subsidies to those individuals purchasing health insurance over an exchange, only applied state-run exchanges. The argument was based on the statement “established by the State” under Section 1311 of the law, which the plaintiffs interpreted to mean that Congress intended tax subsidies to be used exclusively for state-run exchanges. The case made its way to the Supreme Court after being dismissed by the Eastern District Court of Virginia and affirmed by the U.S. Court of Appeals for the Fourth Circuit in 2014.

Justice Roberts wrote for the majority stating that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt.” The Court’s decision ensures that the current system will remain in place, barring any legislative changes, with subsidies available nationwide. If the plaintiffs had won it is estimated that over 6 million people in at least 34 states would have lost subsidies worth an average of $272 per month. A full link to the Court’s opinion can be accessed here.

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