Supreme Court to Hear Crucial Challenge to ACA

The Supreme Court next month will hear arguments in a case that could be fateful for the Affordable Care Act (ACA). That case is King v. Burwell, which challenges a key component of the ACA—namely the provision of tax credits for the purchase of insurance to low-income individuals in states that have not established state health exchanges.

The Court’s decision, which is expected in July, could affect the ability of millions of Americans to receive the tax credits that help them afford health insurance under the ACA.

Last July, the U.S. Court of Appeals for the 4th Circuit for the Eastern District of Virginia ruled in King v. Burwell that Congress clearly intended to make subsidies as widely available as possible to make insurance more affordable. To that court that meant the Internal Revenue Service (IRS) had a right to interpret the strict wording of the ACA to mean that people in all states would be eligible for tax credits (Psychiatric News, August 22, 2014).

But conservative opponents of the ACA argued that the language of the statute indicates that premium subsidies can be extended by the IRS only to individuals purchasing insurance through state-established health exchanges—not the federally run exchange. For instance, on the same day that the Virginia court issued its ruling, a D.C. circuit court judge issued a ruling in Halbig v. Burwell that agreed with plaintiffs that the ACA allows the IRS to issue subsidies only for the exchanges established by states.

“Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process,” Judge Thomas Griffith wrote in the majority opinion for the three-judge panel.

Attorneys general in six states—Oklahoma, Alabama, Georgia, Nebraska, South Carolina, and West Virginia—have filed an amicus brief backing the plaintiffs and calling for the Court to overturn the Virginia appeals court’s ruling. These are among the 37 states that refused to set up ACA-related state insurance exchanges.

Supporters of the ACA counter that the overall intent of the legislation is clearly that insurance should be extended as widely as possible.

In the wake of the November announcement by the Supreme Court that it would hear arguments in King v. Burwell, the Competitive Enterprise Institute (CEI), which is coordinating and funding both the King v. Burwell case and the Halbig v. Burwell case, hailed the news, saying, “This ‘subsidies-for-everyone’ rule affects nearly every person across the country—health insurance policyholders, workers and employers, taxpayers, and state and local governments.” The CEI describes itself as a “public policy organization dedicated to advancing the principles of limited government, free enterprise, and individual liberty.”

A statement by White House press secretary Josh Earnest expressed confidence that the Supreme Court would uphold the statute. “The ACA is working. These lawsuits won’t stand in the way of the Affordable Care Act and the millions of Americans who can now afford health insurance because of it. We are confident that the financial help afforded millions of Americans was the intent of the law, and it is working as Congress designed.

“This lawsuit reflects just another partisan attempt to undermine the Affordable Care Act and to strip millions of American families of tax credits that Congress intended for them to have,” he said. “We are confident that the Supreme Court will recognize both the clear reading of the entire law and the certain intent of Congress in crafting it. Indeed, with uninsured rates plummeting across the country, it’s clear that the Affordable Care Act is already working.”

Exactly what it will mean for the ACA if the Court rules against the statute has been a matter of debate. But in an article published online in the New England Journal of Medicine December 10, 2014, attorneys Nicholas Bagley, David Jones, and Timothy Stoltzfus Jost said that a ruling in favor of plaintiffs could be ruinous for the ACA.

“Not long after the announcement [that the Court would hear the case], some voices began questioning whether a decision in King invalidating the rule would matter all that much,” they said. “Those voices included both proponents of the litigation trying to minimize the chaos it would cause and financial advisers hoping to calm jittery investors. They have argued that states that refused to create insurance exchanges would, under intense political pressure to restore large tax credits to middle-class citizens, move quickly to do so, and the Department of Health and Human Services would help them by relaxing applicable rules.

“We are not so optimistic. If the IRS rule is invalidated—and absent effective contingency planning—a state that has declined to create its own exchange probably won’t be able to stave off the immediate destabilization of its insurance market,” they stated. “[I]f the challengers prevail, the U.S. Treasury will probably have to stop issuing tax credits to users of federal exchanges. Enrollees who are unable or unwilling to pay the full cost of their insurance premiums could see their coverage terminated, perhaps as soon as 30 days after they fail to make a payment.” In addition, they suggested, “Those who retain insurance are likely to be sicker than those who drop coverage, which will skew the risk pools and expose insurers to large, unanticipated losses. ACA supporters thus have good reason to worry.” ■

“Predicting the Fallout from King v. Burwell—Exchanges and the ACA” can be accessed here.