Bioethics Forum Essay

Supreme Court Decision in King v Burwell: Backstory and Next Steps

The Patient Protection and Affordable Care Act (ACA) relies on three primary strategies for expanding health insurance coverage. First, it regulates the insurance market to prevent practices that made it difficult or impossible for sick people to purchase insurance. Second, it expands Medicaid dramatically, particularly for childless adults. Third, it establishes in an individual “mandate,” which requires most people who were uninsured to purchase health insurance. To make the individual mandate affordable, the ACA included subsidies (in the form of IRS tax credits) for individuals with incomes below 400 percent of the federal poverty level.

In King v. Burwell, plaintiffs argued that the federal tax credits should only apply to health insurance exchanges (or “marketplaces,” as they are now called) established by states, not to those established by the federal Department of Health and Human Services. In a 6-3 decision, the Supreme Court upheld the use of federal tax credits for those purchasing health insurance through federal exchanges. If the Court had decided otherwise, more than 6 million people in 34 states would have become ineligible for tax credits, and probably most of them would have dropped the health insurance they purchased through the exchange. This would have destabilized the insurance markets and increased premiums for everyone living in those states.

Writing for the majority, Chief Justice Roberts acknowledged that the language in the statute “is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it is also possible that the phrase refers to all Exchanges—both State and Federal—at least for purposes of the tax credits.”

The Court might have used the Chevron deference to sort out this ambiguity; with this legal principal the Court relies on the agency responsible for carrying out the provision in question to determine the meaning of the law – in this case, the Internal Revenue Service. Instead, the Court said that Congress never delegated to the IRS responsibility for determining whether the subsidies applied to federal exchanges. Roberts argued that the ambiguity required the Court to “turn to the broader structure of the Act to determine the meaning” of the relevant section. The majority went on to reason that “the combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral . . . . It is implausible that Congress meant the Act to operate in this manner.”

In his scathing dissent, joined by Justices Thomas and Alito, Justice Scalia wrote: “Words no longer have meaning if an Exchange that is not established by a State is ‘established by the State.’ It is hard to come up with a clearer way to limit tax credits to state Exchanges than to use the words ‘established by the State’.” He went on to claim that, even though “context matters” when the Court interprets the meaning of a law, the majority opinion used the argument about context as “an excuse for rewriting” the law. Roberts rejected this logic and argued that, “In a democracy, the power to make the law rests with those chosen by the people. Our role is more confined—“to say what the law is.”  He added: “A fair reading of legislation demands a fair understanding of the legislative plan.” In the view of the majority, the intent of Congress was clear. “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 Supreme Court decision allows the implementation of the ACA to continue and has important implications for the legacy of President Obama and Chief Justice Roberts, who wrote two major decisions upholding the constitutionality of the ACA. It does not, however, overcome the many substantive and political problems of the law. As I have written elsewhere, the law does little to curb the cost of health care in the U.S., and this is a threat to its success. Even if they qualify for tax credits, millions of people have opted to pay the penalty (or, as Roberts ruled in NFIB v. Sebelius, the tax) rather than purchase insurance. There may be many reasons for this, including ideological opposition to the law, but one reason is that the cost of insurance is still too high for many people. The longer term success of the ACA and its goal of making affordable health insurance available to all Americans will depend on efforts to reduce the cost of health care.

Michael K. Gusmano is a research scholar at The Hastings Center.

Posted by Susan Gilbert at 06/26/2015 01:46:42 PM |

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