The U.S. Supreme Court today ruled that a key provision of the Affordable Care Act (ACA), aka “Obamacare,” is legal, thereby allowing millions of Americans to keep the tax credit subsidies that help them afford health insurance coverage.
The Court’s 6–3 decision will enable individuals living in states with online health insurance marketplaces run either by their state or the federal government to be eligible for tax subsidies that help slash the cost of health insurance. Challengers to the health care law had maintained in their case against the federal government that only the states that had set up their own state-run insurance marketplaces were allowed to secure the subsidies under the language of the law. The subsidies had been available since January 2014 to help individuals buy insurance.
In the Court’s decision, written by Chief Justice John Roberts, the justices wrote that the subsidies should be available to individuals in each state, regardless of who runs the state’s exchange. At issue in the case was how to interpret the actual legal language under the ACA. It had specified that subsidies could be granted to individuals with modest incomes who bought health insurance from exchanges “established by the state” forcing the Court to decide what the “state” includes.
As part of the ACA, 16 states and Washington, D.C., had set up their own online marketplaces where individuals could shop for health insurance. But most states, because they either had troubles building their own exchanges or chose not to try, instead relied on federal marketplaces overseen by Washington.
If those 34 states had lost their subsidies, it could have had significant ripple effects for health care costs. Without the subsidies to help make insurance affordable only the sickest individuals with low to modest incomes would be likely to continue to purchase insurance in those states. (Meanwhile the healthier individuals may just pay the penalty fee and forgo insurance or be exempted from the insurance requirement altogether if insurance costs more than eight percent of their income.) With only the sicker—and thus more costly—patients in the insurance pool, costs would rise for everyone else in the insurance pool, too. Joining the chief justice in the decision were justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.
The Court’s decision rested on the premise that lawmakers did not intend to delegate the intricacies of this subsidy decision to others."Had Congress wished to assign that question to an agency, it surely would have done so expressly," they wrote. In the decision the justices noted that pulling the subsidies would, “destabilize the individual insurance market in any state with a federal exchange, and likely create the very “death spirals” that Congress designed the act to avoid”—a reference to the combination of rapidly escalating costs for insurance that would result from only the sickest buying insurance and the subsequent inability of individuals to afford buying insurance.
With this ruling by the high court the status quo will be maintained and individuals in all 50 states earning between 100 and 400 percent of the federal poverty line will continue to be eligible for tax subsidies. In the Court’s decision, written by the chief justice, the justices wrote that, “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”
Justice Antonin Scalia, who authored the dissent to the decision, joined by justices Clarence Thomas and Samuel Alito, argued that the exchange phrasing in the Affordable Care Act does not suggest that state and federal exchanges “are in all respects equivalent.” The argument from the dissenters "really comes down to Justice Scalia's longstanding opinion that courts should follow the plain language of statutes word for word and ignore everything else," says Timothy Jost, a law professor at Washington and Lee University. Put simply, their stance was that if Congress wrote the statute poorly Congress must rewrite it, not the Supreme Court.
The five-year-old ACA has now weathered dozens of attempts to roll back the act by the U.S. House of Representatives and two Supreme Court cases that challenged aspects of the law. The ACA is still likely to face other challenges from lawmakers and in the courts. Other legal cases are still pending in the lower courts that challenge the ACA, says Jost, but it is likely with this signal from the Supreme Court that more cases will now be thrown out. In early June Pres. Barack Obama had defended health care reform as a moral initiative, stating at an event in Washington, D.C., that when Americans have had to decide between paying for rent or medicine, “America was not living up to our highest ideals.”
Editor's Note: Update posted at 11:20 A.M. with legal perspective from Timothy Jost.