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Victory for the ACA at Supreme Court

Jun 25, 2015

For a second time, the Affordable Care Act (“ACA” sometimes referred to as “Obama Care”) has survived a challenge at the United States Supreme Court. In its most recent decision issued on June 25, 2015, the Supreme Court upheld ACA subsidies for insurance purchased on Federally-facilitated Exchanges. Had the Supreme Court struck down the subsidies, it may have severely undermined the ACA. The Supreme Court in 2012, upheld the ACA’s provisions requiring individuals to have health insurance, often referred to as the individual mandate. 

The most recent challenge was based on whether the tax credits subsidizing the cost of insurance for certain individuals were permissible for insurance purchased on any exchange created under the ACA. The petitioners had argued that the plain language of the ACA limited such subsidies to only state run exchanges. The IRS regulations, however, did not limit the subsidies to state exchanges but allowed them for both state and federally run exchanges. 

The Supreme Court said, “the statutory scheme compels the Court to reject petitioners' interpretation because it 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.... Petitioners' plain-meaning arguments are strong, but the Act's context and structure compel the conclusion that Section 36B allows. 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." [King v. Burwell, No. 14-114 (U.S. June 25, 2015)] (Supreme Court of the United States)