In a major victory for health care reform, the U.S. Supreme Court upheld the Affordable Care Act (ACA) for a second time last month. The King v. Burwell decision ensures that the federal premium tax credits that were included in the ACA to help low- and middle-income Americans afford health insurance will remain available in all states — whether those states established their own health insurance exchanges or opted to use the federal marketplace, Healthcare.gov. A decision the other way would not have directly impacted Colorado because lawmakers made a bipartisan decision to establish a statewide marketplace, now known as Connect for Health Colorado. But the destabilizing effects of a decision in favor of the King plaintiffs would have resulted in downstream consequences for our state that we were fortunate to avoid.
Colorado is among 14 states that set up their own insurance marketplaces under the ACA. Two other states set up federal-state hybrid marketplaces and 34 states declined to set up a marketplace at all. For those states that chose not to set up a state marketplace, the ACA authorized the Secretary of the Department of Health and Human Services (HHS) to step in and establish marketplaces on the states’ behalf. Since the marketplaces were implemented in January 2014, approximately 6.4 million Americans have enrolled in health insurance with the help of a tax credit through the federal marketplace in one of the 34 state that use it. But the plaintiffs in King argued that the ACA does not make tax credits available to people purchasing insurance on the federal marketplace.
With the June 30 ruling, however, the Supreme Court in a 6-3 decision has firmly put that argument to rest. Writing for the Court, Chief Justice John Roberts stated that the ACA’s statutory scheme “compels us to us 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 spiral’ [in federal exchange states] that Congress designed the Act to avoid.” In recognition of the clear purpose and structure of the ACA’s reforms, the chief justice declared that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”
The court did acknowledge ambiguity in the ACA resulting from “inartful drafting” but was clear that the structure of the statute resolved any ambiguity in favor of the administration. In coming to its conclusion, the court acknowledged the ACA’s “three-legged stool” approach to expanding access to health insurance through the individual market.
The three legs of the stool acknowledged by the Court are: 1) guaranteed access, which prohibits insurers from denying coverage or raising premiums based on preexisting conditions; 2) the individual mandate, which requires virtually everyone to carry health insurance; and 3) sliding scale premium tax credits to make insurance affordable for low- and middle-income individuals. Chief Justice Roberts recognized that these reforms were core elements of the ACA and declared that Congress intended for those elements to work together to improve access to health insurance, whether purchased through a state marketplace or the federal marketplace. The ruling is extremely positive for the future of the ACA because the high court has affirmed that — despite any inartful drafting — the purpose and structure of the ACA make clear that the reforms at issue in King were intended to benefit Americans in every state.
Importantly, the court declined to rule based on deference to the Internal Revenue Service (IRS), eliminating the ability of future administrations to interpret the language at issue in this case differently and make the tax credits unavailable in federal marketplace states. Under Supreme Court precedent in Chevron U.S.A. v. Natural Resources Defense Council, Inc., when an agency such as the IRS, interprets a statute by passing a regulation, the court will defer to that interpretation as long as it is reasonable. Because the IRS had interpreted the ACA as making tax credits available through the federal marketplace, many thought the court might uphold the tax credits by deferring to the IRS regulation. However, the court rejected Chevron’s applicability to this case stating that, “[w]hether those credits are available on federal exchanges is … a question of deep ’economic and political significance‘ that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly.”
Thus, instead of deferring to the IRS, the court has declared once and for all that the ACA’s tax credits are available in every state. As a result of this ruling, an estimated 6.4 million people in the 34 states that use the federal marketplace can breathe a sigh of relief because they will not lose the tax credits that have made quality health insurance affordable for them.
- – Allison Neswood