Friday, June 26, 2015

Supreme Court Upholds Affordable Care Act Subsidy Regulations

The U.S. Supreme Court announced its much awaited decision today in the case of King v. Burwell. In its ruling, the Court upheld a key provision in the Affordable Care Act (“ACA”) that provides government subsidies for health care insurance for all Americans who qualify, regardless of whether the coverage is obtained through a federal or state run health care exchange. The Court’s decision affirmed an earlier decision in the case by the U.S. Court of Appeals for the Fourth Circuit and endorsed the view of the Obama administration that subsidies should be available for all lower and moderate income individuals regardless of where they reside.

The Burwell case originally arose as a challenge to IRS regulations issued under the ACA in 2012. The IRS regulations provide that subsidies are available under the ACA to taxpayers who enroll in health care coverage through any exchange, whether federally or state run. The plaintiffs in Burwell had disagreed with this IRS interpretation of the ACA, claiming that the IRS regulations exceeded the IRS’ authority given that the ACA statute itself only references state-established exchanges in discussing the availability of subsidies.

In upholding the IRS regulations, the Supreme Court’s analysis hinged on its interpretation of the ACA statutory phrase “established by the state.” Chief Justice Roberts noted that, technically, the ACA statute’s wording was problematic, but that the Congressional intent to subsidize coverage through either a federal or state exchange was clear.

The Supreme Court’s decision avoids a multitude of ACA administration problems that would have been created had the Court ruled another way. The ACA has not been without problems, but it has been in operation for five years now and there are many provisions to which people have grown accustomed, such as access to coverage with no pre-existing condition exclusions and certain patient protections. A different result in the Burwell case could have caused significant disruptions to not only coverage obtained through the federal exchanges, but also to state run exchanges and other health care insurance.

The Supreme Court’s decision was not unanimous, however, and the three dissenting Justices had harsh words for the majority. They claim the Court’s ruling represents “somersaults of statutory interpretation” designed to preserve the ACA. For now, though, the Court’s decision permits employers and individuals to continue along the path of working to comply with the ACA and its prodigious body of regulatory and administrative guidance.

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