United States: Obamacare Saved By Supreme Court

In a 6-3 decision credited with saving Obamacare, the Supreme Court ruled on Thursday that the premium subsidies offered to qualifying enrollees of insurance plans offered on federal exchanges, which help more than 6 million Americans pay for their health plans under Obamacare, are legal. The Court declined to apply Chevron1 deference to an IRS regulation authorizing such subsidies, and instead took on the task of determining the correct reading of the statute for itself. In doing so, the Court made it virtually impossible for future administrations to issue any agency regulations that would take the federal subsidies away from people enrolled in health insurance through state or federal exchanges.

Many analysts were convinced that, were the Court to disallow the subsidies, the cost of individual plans would have skyrocketed and Obamacare would have collapsed. Chief Justice Roberts recognized this potential outcome in his majority opinion, writing "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them." Chief Justice John G. Roberts Jr. was joined in the majority by Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sonia Sotomayor. As a result of the ruling, President Obama was able to announce that "the Affordable Care Act is here to stay," at a press conference Thursday morning. Shares of hospital company stocks surged after the ruling was announced.

Now that federal subsidies are conclusively available to individuals purchasing insurance through the federal exchange and state exchanges alike, those states that are struggling to manage their state-based exchanges may decide to hand over exchange operations to the federal government. Given the Washington Post's report that nearly half of the states running state-based exchanges are suffering from financial difficulties, there could potentially be a gradual transition to a single federal exchange.

Political pundits have also noted that the decision may spur a change in position by those states that have yet to opt into the Medicaid expansion afforded as an option under the ACA. While there is no direct connection between the Court's decision and the potential for expansion of Medicaid, the news that the health insurance subsidies have been decisively protected by the Court, as well as the extensive media coverage on the decision, could serve as motivation for politicians and citizens in hold-out states, such as Virginia, Florida and Texas, to more loudly demand access to the federal matching funds that come with Medicaid expansion.

Case Background

Under the ACA, individuals are exempt from the requirement to maintain health insurance coverage if the cost of buying insurance would exceed 8% of that individual's income. However, the ACA also establishes federal subsidies, in the form of tax credits issued by the IRS to individuals with household incomes between 100 percent and 400 percent of the poverty line. These subsidies are meant to prevent anyone from being in the position where the out-of-pocket cost of health insurance would be greater than 8% of his or her income.

Petitioners in David King et al. v. Sylvia Mathews Burwell et al., case number 14-114, four individuals who live in Virginia, argued that they did not wish to purchase health insurance, which would have cost over 8% of their annual income. These individuals challenged the IRS rule that would have provided them subsidies, arguing that the federal exchange operating in Virginia does not qualify as "an Exchange established by the State" under section 36B of the ACA, and that therefore they should not receive tax credits. A decision in their favor would have therefore exempted them from maintaining health insurance.

Court Analysis

The case ultimately focused on just six words of Section 36B of the ACA, which stipulates that for those people who cannot afford health coverage, subsidies are available through "an exchange established by the state." The court's decision turns on whether individuals who are enrolled in health insurance through the Federal exchange qualified for tax credits.

Notably, the court decided that the Chevron two-step analytical framework was not appropriate in this case. Chevron deference requires courts to defer to interpretations of statutes made by those government agencies charged with enforcing them, unless such interpretations are unreasonable, and is typically applied when the Court is analyzing an agency's interpretation of an ambiguous statute. In this case, however, Justice Roberts decisively wrote that the tax credits are one of the Act's key reforms and whether they are available on Federal Exchanges is a question of such "deep economic and political significance . . .[that] had Congress wished to assign that question to an agency, it surely would have done so expressly."

The Court instead determined that it was its task to determine the correct reading of the statute. After first determining that the text is ambiguous, the Court looked "to the broader structure of the Act." It is the court's analysis of the language establishing tax credits, read within the Act's context and structure, that lead to the Court's conclusion "that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid."

Justice Scalia authored the scathing dissent – writing "who would ever have dreamt that "Exchange established by the State" means "Exchange established by the State or the Federal Government"? Emphasizing the definition of "State," and noting that the Secretary of Health and Human Services is decidedly not one, Justice Scalia decries the majority opinion as "pure applesauce" and the logic behind the ruling as "interpretive jiggery-pokery." Claiming that, under the majority opinion, "words no longer have meaning," Justice Scalia writes that the majority "rewrites the law to make tax credits available everywhere. We should start calling this law SCOTUScare." Justice Scalia was joined in his dissent by Justices Clarence Thomas and Samuel A. Alito Jr.

Footnote

1 Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.