U.S. Supreme Court to Review Challenge to ACA Subsidies
The U.S. Supreme Court decided November 7 to review an action challenging the validity of offering subsidies to those who purchase health insurance through the federally facilitated marketplaces. King v. Burwell, No. 14-114 (U.S. petition for cert. granted Nov. 7, 2014).
In King v. Burwell
, 759 F.3d 358 (4th Cir. 2014), a Fourth Circuit panel upheld an Internal Revenue Service (IRS) final rule that allows individuals to qualify for premium tax credits regardless of whether they purchase coverage through a state-based or federally run marketplace.
The plaintiffs who challenged the rule argued the plain text of the ACA indicates the tax credits should be available only through the state-based marketplaces.
The statute provides that an individual’s tax credit is determined based on the cost of insurance purchased on “an Exchange established by the State.” According to plaintiffs, the subsidies were set up this way to incentivize states to run their own marketplaces rather than leave their operation to the federal government.
In a separate case, a D.C. Circuit panel agreed with this argument, finding the ACA “unambiguously restricts the section 36B subsidy to insurance purchased on exchanges ‘established by the State.’” Halbig v. Burwell
, 758 F.3d 390 (D.C. Cir. 2014). However, the full D.C. Circuit in September agreed to rehear the 2-1 panel decision.
Both rulings essentially boiled down to whether the phrase “an Exchange established by the State” under the ACA is ambiguous, with the D.C. Circuit panel finding the meaning of this language clear, and the Fourth Circuit reaching the opposite conclusion and affording deference to the administration’s interpretation through the IRS rulemaking.