Supreme Court Takes Up ACA Federal Subsidy Case

Author: Gloria Ju

November 10, 2014

The US Supreme Court will review a legal challenge to the Affordable Care Act (ACA) and the availability of premium subsidies in states that chose not to establish a health care exchange and instead rely on the federal exchange. The Court announced on November 7 that it will hear King v. Burwell, in which a three-judge panel of the 4th Circuit Court of Appeals ruled that individuals who purchase insurance on the federal exchange are eligible for the subsidies.

Earlier this year, two other courts had come to the opposite conclusion. A three-judge panel for the US Circuit Court Appeals for the District of Columbia Circuit held in Halbig v. Burwell, and an Oklahoma federal court held in State of Oklahoma v. Burwell, that subsidies are only available through a state-run exchange. However, the full DC Circuit Court later vacated Halbig and is scheduled to hear the case next month.

The sticking point of these cases is the proper interpretation of the actual language of the law. The ACA states that subsidies are available to individuals who purchase health insurance through an exchange "established by the State." Challengers of the law argue that a literal reading of the law limits subsidies to health insurance purchased on a state exchange, and does not apply to the federal exchange. Proponents of the law contend that the intent of the law is to cover all individuals, whether they go through a state exchange or the federal exchange. The IRS has taken the position that the subsidies are available regardless of where an individual purchased insurance coverage.

About two-thirds of the states chose not to establish an exchange, so the Supreme Court's decision could affect millions of individuals who received subsidies on the federal exchange and the overall viability of the ACA itself.

"We are confident that the financial help afforded millions of Americans was the intent of the law and it is working as Congress designed," the White House said in a statement. "American families who have already enrolled, or are planning to sign up during the open enrollment period beginning on November 15, should know that nothing has changed: tax credits and affordable coverage remain available."