In a significant victory for the Obama administration, the Supreme Court voted in a 6-3 decision in King v. Burwell that the Affordable Care Act authorized federal tax credits for eligible Americans living not only in states with their own exchanges but also in the 34 states with federal exchanges. Here is what you should know about the case and the ruling.
What was the case about?
At the core of the Affordable Care Act (aka Obamacare), the Court noted, were three key reforms: (1) Guaranteed issue and community rating requirements, (2) Require individuals to maintain health insurance coverage or make a payment to the IRS, unless the cost of buying insurance would exceed eight percent of that individual’s income, and (3) Seek to make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 per cent and 400 percent of the federal poverty line
Additionally, Obamacare requires the creation of an “Exchange” in each State—basically, a marketplace that allows people to compare and purchase insurance plans. The law gives each State the opportunity to establish its own Exchange, but provides that the federal government will establish “such Exchange” if the State does not. This case hinged on what “an Exchange established by the State under [42 U. S. C. §18031]” could mean since several individual states refused to establish their own exchanges.
The Internal Revenue Service interpreted the wording broadly to authorize the subsidy also for insurance purchased on an Exchange established by the federal government. The four individuals who challenged the law argued that a federal Exchange is not an “Exchange established by the State,” and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges. Several district courts agreed with the government, but because one sided with the plaintiffs the case ended up at the Supreme Court.
Can you explain that without the legalese?