Today, in King v. Burwell, the U.S. Supreme Court determined that the IRS is permitted to promulgate regulations under section 36B that would extend tax-credit subsidies under the Patient Protection and Affordable Care Act (Act) to individuals who buy healthcare coverage through federally established exchanges.  The four plaintiffs had challenged an IRS regulation which interpreted the language of the Act as authorizing tax-credit subsidies for medical insurance purchased on a federally established exchange.  The plaintiffs contended that the Act prohibits the federal government from granting tax-credit subsidies in states that do not have their own exchanges. 

The Supreme Court affirmed the Fourth Circuit decision, but adopted different reasoning.  Unlike the Fourth Circuit, which deferred to the IRS’s interpretation of the Act underChevron, the Supreme Court engaged in its own statutory interpretation.  According to Chief Justice Roberts, who wrote for the majority and was joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan, “[t]he tax credits are among the Act’s key reforms, involving billions of dollars in spending each year and affecting the price of health insurance for millions of people.  Whether those credits are available on Federal Exchanges is thus a question of deep ‘economic and political significance’ that is central to this statutory scheme; had Congress wished to assign that question to an agency, it surely would have done so expressly. . . . It is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort. . . . This is not a case for the IRS.  It is instead our task to determine the correct reading of Section 36B.”  After considering the “context and structure” of the Act, Roberts concluded that the section 36B “credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.”

In dissent, Justice Scalia described the majority opinion as “quite absurd.”  Justices Thomas and Alito joined Justice Scalia’s dissenting opinion.