King v. Burwell
Headline: Court upholds tax credits for people who buy insurance on federal-run exchanges, allowing millions to receive subsidies and keeping coverage more affordable in states without their own exchanges.
Holding: The Court held that the Affordable Care Act allows premium tax credits for people who enroll in insurance through Exchanges established under the Act, including those run by the federal government.
- Keeps premium tax credits available to people who buy insurance on federal-run exchanges.
- Prevents large premium increases and widespread loss of coverage predicted if credits were removed.
- Affirms subsidies for millions in states that did not set up their own exchanges.
Summary
Background
Four individuals living in Virginia, a State that uses a federal-run Exchange, challenged an IRS rule that lets people get tax credits when they buy insurance through Exchanges run by either a State or the federal government. The Affordable Care Act created three linked reforms: rules forcing insurers to accept people and limit price differences, a requirement that many people maintain coverage, and tax credits to make coverage affordable. The Act lets States create Exchanges, but authorizes the federal government to step in if a State does not.
Reasoning
The key question was whether the ACA’s tax credits apply when an Exchange is run by the federal government. The Court found the statute ambiguous but refused to defer to the IRS because the issue was of major economic and political significance. Reading the statute as a whole, the Court concluded that tax credits must be available on any Exchange established under the Act. The Court emphasized that denying credits on federal Exchanges would undermine the statute’s design and could destabilize insurance markets.
Real world impact
By affirming the lower court, the Court left in place tax credits for people who buy coverage on federal Exchanges. That outcome matters because 16 States and the District of Columbia set up their own Exchanges while 34 States rely on the federal Exchange, and most people who used the federal Exchanges received credits. The Court relied on evidence and studies showing that removing credits would likely raise premiums and increase the number of uninsured, and it read the law to avoid those results.
Dissents or concurrances
Justice Scalia’s dissent argued the phrase "established by the State" plainly excludes federal Exchanges and that the majority rewrote the statute, exceeding the Court’s interpretive role.
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