Updates
June 25, 2015

In a 6 to 3 decision today, the U.S. Supreme Court ruled in the case King v. Burwell and upheld federal tax subsidies in the federally operated health exchanges created under the Affordable Care Act. King v. Burwell is the third high-profile challenge to the Affordable Care Act and today’s outcome has the practical effect of upholding the law.

Chief Justice Roberts delivered the Court’s opinion and he was joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan. Justice Scalia wrote a dissenting opinion in which he was joined by Justices Thomas and Alito.

The ACA created a new mechanism of delivering health insurance coverage to previously uninsured individuals and through the use of three policy levers. First, it prohibits insurers from discriminating against anyone seeking to obtain health insurance coverage. This guaranteed that anyone seeking health insurance coverage would be able to obtain it. Second, it requires that everyone must obtain health insurance coverage (individual mandate), and guarantees that the health insurance risk pool is populated with an adequate mixture of high and low risk patients. The Court has already held that the individual mandate is constitutional in the case National Federation of Independent Business v. Sebelius. Third, the law provides for tax subsidies for low-income and middle class individuals purchasing coverage to ensure they are able to afford health insurance.

The ACA also created health insurance exchanges for individuals and small groups to shop for health insurance coverage. King v. Burwell focuses on the validity of the tax subsidies provided to individuals that purchase coverage through a federal health insurance exchange. Exchanges are online portals that allow consumers to shop and compare health insurance coverage in one location, and the ACA permitted states to establish their own exchanges or to elect to have the federal government establish and operate an exchange on its behalf. Only 16 states and the District of Columbia operate their own state based exchanges. The remaining 34 jurisdictions are operating some form of federally supported exchange. However, in anticipation of a negative Court decision, some states began preparing to establish their own exchange.

King v. Burwell interprets language in the ACA that states the formula for calculating the tax subsidy for individuals purchasing coverage through “an Exchange established by the State.” The challengers argued that this language precluded the application of tax subsidies to individuals purchasing health insurance through federal exchanges, while the Obama Administration argued that the tax subsidies are permissible in federal and state exchanges because of the overall policy goals and the intent of the Act.

The availability of tax credits for individuals and small groups purchasing coverage in the ACA’s health insurance exchanges is vital to the law’s success, because it makes health insurance coverage affordable for a segment of the population that was previously uninsured. Chief Justice Roberts closing paragraph sums it up by stating:

“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.”

The Supreme Court’s decision to uphold tax subsidies for consumers purchasing coverage in the federal exchange will allow the Administration to continue implementing the ACA in accordance with the status quo. Despite this decision in favor of the Administration, we expect Congressional Republicans will continue with efforts to repeal and replace the ACA. These efforts would certainly be vetoed by President Obama.

Outlook

The Court’s opinion just about slams the door on judicial challenges to the ACA. There is still a case pending brought by the Republican majority of the U.S. House of Representatives that argues the Administration exceeded its authority when it implemented the ACA.

However, the political and legislative struggle over implementation of the ACA is far from over. Press statements from the House and Senate Republican majority make it clear they intend to proceed with legislative repeal of the ACA, but there are several budgetary and procedural obstacles.

First, the House and Senate FY 2016 budget resolution included reconciliation instructions to repeal the ACA. In addition, the House Committees on Education and the Workforce, Energy and Commerce, and Ways and Means and the Senate Committees on Finance and Health, Education, Labor and Pensions are each directed to produce bills reducing the deficit by $1 billion over ten years. Reconciliation bills are due to the respective Budget Committees by July 24th.

Second, earlier this week the Congressional Budget Office (CBO) released a report entitled Budgetary and Economic Effects of Repealing the Affordable Care Act. CBO, along with the Joint Committee on Taxation, concluded that ACA repeal would increase federal budget deficits by $137 billion over 10 years. The House can move a reconciliation bill with repeal language but no budget offsets by having the Rules Committee report a rule waiving all points of order. However, in the Senate, a reconciliation bill without sufficient budget offsets is subject to a 60-vote Budget Act point-of-order, making it all but impossible for Republicans to get a reconciliation bill that repeals the ACA through the Senate.

Third, in light of today’s decision, Republican presidential candidates are likely to campaign even harder on ACA repeal. Four GOP presidential candidates are U.S. Senators (Rand Paul [R-KY], Lindsey Graham [R-SC], Ted Cruz [R-TX], and Marco Rubio [R-FL]) and each has made ACA repeal a major part of their platforms. Any ACA-related legislation that does not contain repeal language will likely be filibustered by them.

Fourth, the House and Senate appropriations committees have been reporting FY 2016 bills which include language intended to defund ACA implementation. The House will be able to pass its bills easily. However, Senate Minority Leader Harry Reid [D-NV] has promised to filibuster all appropriations bills until Republicans agree to renegotiate discretionary spending caps. Senate Democrats have already stalled the FY 2016 Department of Defense bill. One can anticipate filibusters concerning any ACA weakening language.

In short, despite today’s ruling, the political and public relations struggle over implementation of the Affordable Care Act on Capitol Hill will continue for some time.