BY MARY M. BEARDEN AND ALLISON SHELTON, Brown & Fortunato, P.C.
On June 25, 2015, the U.S. Supreme Court issued its ruling on the latest challenge to the Affordable Care Act (ACA). The Supreme Court heard oral arguments on March 4, 2015, from both sides and, in a 6-to-3 opinion, upheld the disputed provisions of the ACA. Chief Justice John Roberts penned the majority opinion, and Justice Antonin Scalia filed the dissenting opinion.
The challenge in King v. Burwell centered on insurance subsidies and the health insurance exchanges. The ACA mandated the creation of health insurance exchanges or healthcare marketplaces, virtual shopping malls where individuals could shop and price different health care plans in their area to find the plan that best suits their needs. These health insurance exchanges are often compared to discount hotel websites. The states were charged with organizing and creating the health insurance exchange for their state, and the federal government provided them with a deadline of January 1, 2014. If the state failed to create a health insurance exchange by the deadline, the federal government created a healthcare marketplace for the state. By the deadline, only about onethird of the states had created state-run health insurance exchanges, leaving the federal government to create a healthcare marketplace for the remaining 32 states. In addition to health insurance exchanges, the ACA provides subsidies to individuals who purchase insurance from a health insurance exchange and who earn up to 400% of the federal poverty line or FPL, which equates to about $80,360 for a family of three. These subsidies, provided in the form of tax credits, are meant to help struggling families pay for the costs of health insurance available on a health insurance exchange. During its first year of implementation, approximately 3.5 million people received these health insurance subsidies.
The plaintiffs in King v. Burwell challenged the provision of the health insurance subsidies to individuals who purchased health insurance from a federally-run healthcare marketplace. This challenge arose from the language of the ACA itself, which provides that “a state shall establish” procedures for creating its own health insurance exchange. King and the other plaintiffs objected to the provision of health insurance subsidies to individuals who purchased health insurance from a federallyrun healthcare marketplace because they interpreted the language of the ACA to mean that the only individuals who are eligible for health insurance subsidies are those who purchase insurance from a health insurance exchange “established by the State.”
In a nutshell, the entire challenge to the ACA in this case was based on the statutory interpretation of the phrase “an Exchange established by the State”. As such, the opinion drafted by the Supreme Court is replete with analyses and interpretations of specific sections, passages, and even words within the ACA. The Supreme Court’s analysis had two focal points: (1) whether the phrase “an Exchange established by the State” is ambiguous when read in the context of the ACA and (2) whether Section 36B of the ACA that created health insurance exchanges could be read in such a way as to permit the outcome argued by King.
In its opinion, the Supreme Court stated that the phrase at issue should be interpreted within the context of the ACA rather than standing on its own. Once read in context, the Court reviewed the phrase against definitions from other sections of the ACA as well as the statutory authority of the Secretary of Health and Human Services to establish federally-run healthcare marketplaces within a state. After a review of the phrase in this context, the Supreme Court determined that the “an Exchange established by the State” was sufficiently ambiguous to encompass both state and federally-run health insurance exchanges. The Court then turned to the question of whether Congress could have meant the ACA to operate the way that the plaintiffs argue, namely that only individuals purchasing insurance on state-run health insurance exchanges should be the benefactors of health insurance subsidies. The Court stated that the natural result of this interpretation would be that state-run health insurance exchanges would provide expanded insurance for its citizens while the federally-run healthcare marketplaces would not. Thus, for citizens residing in states with federally-run healthcare marketplaces, the access of health insurance would be limited by their ability to pay. This outcome runs counter to one of the main goals of the ACA, which is to create access to health insurance for all Americans, regardless of their financial situation or employment status. According to the Supreme Court, this would lead to a “death spiral” for health reform that Congress could not have intended in drafting the document.
The ambiguity of the phrase “an Exchange established by the State,” coupled with the Court’s interpretation of Section 36B of the ACA, led the Court to uphold the availability of health insurance subsidies to any individual purchasing health insurance through a health insurance exchange, regardless of whether it is run by the state or federal government. For individuals who purchase health insurance on a health insurance exchange, this means that any assistance they have received from the federal government remains unchanged. This is a welcome result for the benefactors of health insurance subsidies as well as supporters of the ACA.