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Tax Subsidies for All: SCOTUS Rules in Favor of Obamacare

By Christopher Coble, Esq. | Last updated on

Obamacare lives to fight another day!

The health care law, more formally known as the Patient Protection and Affordable Care Act (ACA), withstood yet another attempt to negate it today after the Supreme Court ruled in favor of the government in King v. Burwell.

Near Economic Death Spiral

The ACA was passed in 2010 as a reform of the health insurance market. The three major aims of the act were to 1) adopt guaranteed issue and community rating requirements, 2) require all individuals to buy health insurance coverage, and 3) make health insurance affordable by providing low income individuals refundable tax credits.

The tax credit subsidies are a major component of the law that makes the reforms possible. In King v. Burwell, opponents of the ACA argued that the federal subsidies only applied to states that set up their own insurance exchange. Opponents relied on the literal interpretation of four words, "established by the state," in the law to argue that Congress did not intend for states that relied on the federal exchange to receive any subsidies.

With 34 states relying on the federal exchange, a ruling for the challengers would have cut subsidies to over 6 million Americans. Solicitor General Donald B. Verrilli, JR. argued that cutting subsidies would cause an "economic death spiral" that would cause the health insurance system to collapse.

Congress Didn't Mean What It Said?

In a 6-3 decision, the Supreme Court ruled that ACA does authorize federal tax credits to states with their own exchanges and states that rely on the federal exchange.

The Court admits that the phrasing of the law does seem to imply that only states with their own exchanges are eligible for federal tax credits. However, the Court looked at Congress' intent instead. 

Chief Justice John Roberts wrote, "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. ... If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. ... The context and structure of the Act compels us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase."

Essentially, the Court is saying, "We know what they said, but that's not what they meant." Congress intended to make buying health insurance easier and more affordable, so the law will be interpreted to make that possible. Federal tax credits for all.

Regardless of how you may feel about that interpretation, millions will now be able to rest easy in the knowledge that their health insurance coverage remains intact.

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