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Supreme Court Will Hear Legal Challenge to ACA Subsidies

Supreme Court Will Hear Legal Challenge to ACA Subsidies

November 10, 2014 — The Supreme Court on Friday announced that it will hear a case -- King v. Burwell -- that challenges subsidies to help U.S. residents purchase health insurance plans through the Affordable Care Act's (PL 111-148) federal insurance marketplace, also called an exchange, the New York Times reports.

Arguments in the case likely will be presented in February or March of next year. The high court likely will decide on the case in June 2015, according to the Times.

Background

The central issue in the case is how to interpret language in the text of the ACA regarding subsidies to help certain U.S. residents purchase health plans.

While the ACA states that the subsidies are available to help people purchase health plans offered through "an exchange established by the state," an IRS rule allows the subsidies to be used in an exchange administered either by a state or the federal government.

Key Arguments

The plaintiffs in the suit argue that the IRS rule should be invalidated because it contradicts what Congress originally wrote in the ACA.

However, Solicitor General Donald Verrilli argued in a Supreme Court filing that the IRS is interpreting the law correctly and that the plaintiffs' interpretation is "contrary to the act’s text and structure and would render the act unrecognizable to the Congress that passed it."

Potential Impact on Coverage

A ruling in the plaintiffs' favor could drastically alter the scope of the law's coverage expansion, according to the Times. If the Supreme Court declares the subsidies are illegal, individuals currently receiving subsidies in states that did not create their own insurance marketplaces under the ACA would become ineligible for the credits (Liptak, New York Times, 11/7).

According to The Hill, roughly 87% of individuals enrolled in ACA coverage through the federal exchange received subsidies. A recent Robert Wood Johnson Foundation report noted that if the court were to rule the subsidies illegal, it would end more than $36 billion in tax credits for those with ACA coverage. In addition, the report said such a ruling could have a "domino effect" on other portions of the law (Ferris , The Hill, 11/7).

Michael Carvin, an attorney representing the plaintiffs, said that a ruling in their favor would "mea[n] millions of people are ineligible for subsidies and exempt from the ACA's individual mandate penalty," as well as "hundreds of thousands of employers" being "free of the [ACA]'s employer mandate" (Barnes, Washington Post, 11/7).

Separately, America's Health Insurance Plans Director of Communications Clare Krusing noted that "significant policy changes would be required to ensure an affordable and stable market for consumers were the court to rule against the government."

Reaction

White House press secretary Josh Earnest said the challenge "reflects just another partisan attempt to undermine the [ACA] and to strip millions of American families of tax credits that Congress intended for them to have." He added, "We are confident that the financial help afforded millions of Americans was the intent of the law and it is working as Congress designed" (New York Times, 11/7).

Families USA Executive Director Ron Pollack said the court's decision to hear the case "appears to be a very political act on the part of at least four" justices, which is the number of justices required to vote to hear a case. He added that the decision "really flies in the face of the various guidelines the court uses to decide which cases it will schedule to hear," since there is not a split ruling on the issue in the lower courts (Washington Post, 11/7).

Meanwhile, Jonathan Adler -- a law professor at Case Western Reserve University who helped to mount the challenge -- praised the decision. He said, "The Supreme Court has the opportunity to reaffirm the principle that the law is what Congress enacts, not what the administration or others wish Congress had enacted with the benefit of hindsight" (New York Times, 11/7).