This morning, the U.S. Supreme Court issued its opinion in the case King v. Burwell. The Court ruled 6-3 that individuals who purchase health insurance through the federal exchange, www.healthcare.gov, can received subsidies based on their income.
The plaintiffs in the case argued that only individuals who purchased coverage through a state-based exchange should be eligible for subsidies because the text of the Affordable Care Act (ACA) says subsidies are available to people who enroll through an exchange “established by the State.” The agency responsible for administering the tax subsidies, the IRS, interpreted this broadly to include any public exchange, regardless of whether it is established by a state or the federal government. The majority of the Court found that while the meaning of the four words in question may appear clear in isolation, this is not the case when read in the full context of the law.
Because the meaning of the text was not clear, the Court looked to Congress’ intent when passing the law. It concluded that Congress intended the ACA to improve the operation of the individual insurance market through the interplay of subsidies and the individual mandate. Further, restricting subsidy availability to states with their own exchanges would create a “death spiral” elsewhere, which would frustrate the law’s objectives. Chief Justice John Roberts also rejected the plaintiff’s argument that the language in question showed Congress was trying to encourage states to set up their own exchanges because of another section of the law that required the federal government to operate an exchange in states that declined to do so.
Today’s decision is seen as a victory for the insurance industry, as well as the Obama administration. If the decision had gone the other way, insurers would still have been required to issue coverage to individuals regardless of their health. But not as many healthy people would have been required to purchase coverage and offset the insurer’s costs of covering the sick. With the status quo maintained, some observers believe that some of the few states who established their own exchanges may change their minds and shut them down in favor of the federal website.