The U.S. Supreme
Court will review the ruling in King v. Burwell on whether the
Affordable Care Act's ("ACA's") premium subsidies extend to
lower income individuals served by the Federal Insurance Exchange (or
Background. The ACA requires all non-exempt individuals to obtain
minimum essential health coverage or pay a penalty. To encourage
compliance, the ACA authorizes the IRS to provide health insurance
premium tax credits (i.e., subsidies) to eligible individuals
whose incomes are between 100 and 400 percent of the federal poverty
level and who are not eligible for other minimum essential coverage.
Subsidies are only available to individuals who purchase coverage
through an insurance exchange.
The ACA contemplates
that states will establish their own health insurance exchanges. When
a state fails to establish its own exchange, the ACA authorizes the
federal government to step in and operate an exchange for that state.
sections of the ACA that describe the process for calculating the
amount of the subsidies, and for determining what months can be
covered by the subsidies speak of an individual enrolled in a
qualified health plan "through an exchange established by the
State." Under IRS regulations, subsidies are to be awarded to
qualifying individuals whether they bought health insurance coverage
through a state or federal exchange.
Prior Cases. In King v. Burwell, the plaintiffs argued that
the ACA, as written, only authorizes a subsidy for insurance
purchased through an exchange established by one of the states or the
District of Columbia. Accordingly, the plaintiffs asserted that, in
issuing the subsidy regulations, the IRS had interpreted the ACA too
broadly by providing that subsidies are available for insurance
purchased through the Federal Exchange. Therefore, the plaintiffs
asked the Fourth Circuit to invalidate the portion of the IRS subsidy
regulations that authorize subsidies for insurance purchased through
a Federal Exchange.
Circuit rejected the plaintiffs' argument and upheld the IRS's
subsidy regulations, noting that the IRS's interpretation of the law
was a permissible exercise of the agency's discretion. The court
determined that the subsidies were essential to fulfilling the ACA's
purpose and that Congress was aware of their importance when drafting
the legislation. The court also found that the relevant provisions of
the ACA were ambiguous and that the IRS had crafted a rule that
ensured that subsidies were widely available. As a result, the court
ruled that the IRS's regulations were a permissible interpretation of
the ambiguous provisions and that it must defer to the IRS's
regulatory authority to make such interpretations.
In Halbig v.
Burwell, the plaintiffs made the same arguments as those made by
the plaintiffs in King. A three-judge panel for the Court of
Appeals for the District of Columbia Circuit ruled in favor of the
plaintiffs and invalidated the IRS subsidy regulations. In making
this ruling, the majority ruled that the ACA only authorizes a
premium subsidy for insurance purchased through state-level
exchanges. Accordingly, the majority determined that the IRS had
interpreted the ACA too broadly and ruled that the ACA does not
authorize the IRS to provide a subsidy for insurance purchased
through a federal exchange.
decision, however, has been set aside while the full court
reconsiders the issue.
Review of King. In agreeing to
review King, the Supreme Court must now determine how to
interpret the legislative language chosen by Congress. In doing so,
the Court will have to address the validity of the IRS regulations as
well as the broader question of whether the words Congress chooses
are to be the sole guide for what a law provides, or whether the
larger purpose that Congress had in mind when crafting the law should
determine how to interpret the words.
the Court typically grants review only where there is a split in the
federal appeals courts. The lack of such a split, however, did not
prevent the Court from granting review of the King case. The
Court was apparently compelled to do so based on the challengers'
assertion that the longer the subsidies continue to consumers who had
gone to the Federal Exchange, the harder it would be to undo the
program should the Court accept the challengers' interpretation.