Yesterday, in King v. Burwell, the United States Supreme Court concluded, by a 6-3 vote, that tax credits are available for health insurance purchased on a State or Federal Health Insurance Exchange for any applicable taxpayer. The issue was whether tax credits authorized under the Affordable Care Act (“ACA”) are available in states that decided not to establish a Health Insurance Exchange, and therefore have an Exchange run by the Federal government.
Last summer we published a summary of the cases leading up to yesterday’s decision, available here. Many considered this case the strongest challenge to the ACA. The opposite result would have invalidated ACA tax credits in 34 states (including Alabama), and probably would have invalidated the employer mandate penalties for employers in those same states. Yesterday’s decision is the second time that the ACA has survived Supreme Court scrutiny.
A copy of the Supreme Court’s opinion is available here. This excerpt from the Court’s opinion summarizes its reasoning:
Petitioners’ arguments about the plain meaning of Section 36B are strong. But while the meaning of the phrase “an Exchange established by the State under [42 U. S. C. §18031]” may seem plain “when viewed in isolation,” such a reading turns out to be “untenable in light of [the statute] as a whole.” Department of Revenue of Ore. v. ACF Industries, Inc., 510 U. S. 332, 343 (1994). In this instance, the context and structure of the Act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase. Reliance on context and structure in statutory interpretation is a “subtle business, calling for great wariness lest what professes to be mere rendering becomes creation and attempted interpretation of legislation becomes legislation itself.” Palmer v. Massachusetts, 308 U. S. 79, 83 (1939). For the reasons we have given, however, such reliance is appropriate in this case, and leads us to conclude that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those 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 a democracy, the power to make the law rests with those chosen by the people. Our role is more confined—“to say what the law is.” Marbury v. Madison, 1 Cranch 137, 177 (1803). That is easier in some cases than in others. But in every case we must respect the role of the Legislature, and take care not to undo what it has done. A fair reading of legislation demands a fair understanding of the legislative plan. Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress’s plan, and that is the reading we adopt. The judgment of the United States Court of Appeals for the Fourth Circuit is Affirmed.
For individuals, tax credits for health insurance purchased on a State or Federal Exchange will continue to be available for persons who meet the income guidelines and other qualifications. For applicable large employers, the employer mandate penalties and annual reporting requirements will continue to apply. Contact your Sirote advisor to discuss the implications for your business.