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Home > Blog > Supreme Court Upholds Obamacare Tax Subsidies
TUESDAY, JUNE 30, 2015

Supreme Court Upholds Obamacare Tax Subsidies

The U.S. Supreme Court today upheld the tax subsidies for health insureds across the country including those in states without their own health exchanges that use the federal health insurance exchange.

In a 6-3 opinion (King v. Burwell) written by Chief Justice John Roberts, the court  rejected a challenge based on a four-word phrase that said tax credits would be available only on an exchange “established by the state” and thus should not be available to the states that use the federal exchange for purchasing insurance. Only 16 states have their own exchange.

However, the court found that the phrase should be read in the broader context of the entire statute and not in a way that limits the availability of the subsidies. Reading it narrowly “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,” the court said.

The court said Congress made the guaranteed issue and community rating requirements applicable in every state, but those requirements only work when combined with the coverage requirement and tax credits. “It thus stands to reason that Congress meant for those provisions to apply in every State as well,” the court said.

The 6-3 opinion by Roberts was joined by Justices Anthony Kennedy, Ruth Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.

The subsidies reduce health insurance premiums for lower-income Americans. Curtailing them could have affected more than 6.4 million people in 34 states who purchase private health insurance through the federally run exchanges, according to the Centers for Medicare and Medicaid Services.

Justice Antonin Scalia wrote a dissent in which Justices Clarence Thomas and Samuel Alito concurred.

“Words no longer have meaning if an Exchange that is not established by a State is ‘established by the State.’ It is hard to come up with a clearer way to limit tax credits to state Exchanges than to use the words ‘established by the State.’ And it is hard to come up with a reason to include the words ‘by the State’ other than the purpose of limiting credits to state Exchanges,” wrote Scalia.

President Obama

President Obama welcomed the decision that preserves one of the main legislative accomplishments of Democrats and his administration that has come to be known as Obamacare.

“Today, after more than 50 votes in Congress to repeal or weaken this law, after a presidential election based in part on preserving or repealing this law, after multiple challenges to this law before the Supreme Court, the Affordable Care Act is here to stay,” he said in remarks from the White House before noon.

“This was a good day for America,” Obama said. “Let’s get back to work.”

House Speaker John Boehner (R-Oho) vowed that he and his fellow Republicans would continue their efforts to repeal or replace Obamacare, claiming the law is “fundamentally broken” and that it is raising costs for millions of Americans.

“Republicans will continue to listen to American families and work to protect them from the consequences of ObamaCare,” Boehner said in a statement.  “And we will continue our efforts to repeal the law and replace it with patient-centered solutions that meet the needs of seniors, small business owners and middle-class families.”

A major trade group for health plans, America’s Health Insurance Plans (AHIP), issued a brief comment.

“With the certainty provided by the Supreme Court’s decision, now is the time to focus on what matters most to consumers – ensuring access to affordable coverage and high-quality health care. Health plans will continue to lead in advancing this goal,” AHIP’s interim CEO Dan Durham said.

Insurance Broker

Today’s U.S. Supreme Court decision allowing subsidies also reinforces the enforceability of the employer mandate, said principals at large insurance broker Lockton.

Still there are challenges ahead, according to Mark Holloway, director of Compliance Services for Lockton Benefit Group.

“The court has once again rescued a significant piece of the Affordable Care Act,” said Holloway. “Today’s decision removes the uncertainty surrounding the fate of the employer mandate in the 34 states depending on the federally-operated marketplace for employers doing business in one or more of those states. The employer mandate is alive and well.”

But, Holloway said, litigation will continue for the foreseeable future. He said the House of Representatives is suing President Obama challenging the administration’s delay of the employer mandate from 2014 to 2015. In addition, there is another subsidy-related lawsuit working its way through a federal court, one that challenges federal payments made to insurers to shrink deductibles and other cost-sharing aspects of health insurance coverage sold through the online public marketplaces, Holloway said.

“Regardless of what comes next, this decision impacts many of our 41,000 clients who have been working hard over the last five years to meet the health reform law’s employer mandate,” said Bob Reiff, president of Lockton Benefit Group.

By Andrew G. Simpson

Contact us for South Carolina health insurance quote.

Posted 12:42 PM

Tags: insurance, health insurance, obamacare, supreme court decision, scotus
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