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Supreme Court upholds key provision of Affordable Care Act

In 6-3 decision, justices rule that subsidies provided to help people pay for insurance on federal exchanges are legal

The Supreme Court upheld a key provision of the Affordable Care Act on Thursday, preserving the health care law by a 6-3 decision and dealing a huge political win to the Obama Administration.

In King v. Burwell, Chief Justice John Roberts and Justice Anthony Kennedy joined the court’s four liberal justices to allow the federal government to provide subsidies to people in 34 states that did not set up their own exchanges. The ruling will enable an estimated 6.4 million people to keep their health care coverage, according to the Kaiser Family Foundation. 

The plaintiff’s case hinged on four words buried in section 36B of the Internal Revenue Code. That section states that the ACA subsidies designed to help people pay for health insurance are available to those who purchase insurance plans on exchanges “established by the State.” The argument, originally developed by conservative advocates at a conference sponsored by the American Enterprise Institute, was that these words should be read literally and that, therefore, the subsidies given to individuals in states that relied on federally run marketplaces were illegal.

In defense, the government’s lawyers argued that this literal reading ignored other parts of the ACA, such as section 1321, which they said was designed to lay out a backup plan for instances where a state does not elect to establish its own exchange. In those cases, the law says, the Department of Health and Human Services “shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State.”

Further, they argued, even if the language of the ACA was unclear, a previous Supreme Court case, 1984’s Chevron v. Natural Resources Defense Council already established that agencies in the executive branch — like the Department of Health — should have the leeway to reasonably interpret ambiguities in statutes they administer.

Writing for the majority, Roberts acknowledged that the ACA had "more than a few examples of inartful drafting." But, "in this instance," he wrote, "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."

In a dissent laden with colorful turns of phrase, Justice Antonin Scalia dismissed parts of the majority opinion as "pure applesauce." "Words no longer have meaning if an Exchange that is not established by a State is 'established by the State,'" he wrote.

Supporters of the Affordable Care Act gather in front of the U.S Supreme Court during a rally March 4, 2015 in Washington, DC. The Supreme Court was scheduled to hear oral arguments in the case of King v. Burwell that could determine the fate of health care subsidies for as many as eight million people.
Alex Wong / Getty Images

Though the dispute was over just four words, some argued that it had the potential to sink the ACA entirely. The court’s decision for the defense will forestall any possibility of the so-called ACA “death spiral” — the idea that young and healthy people would forgo health insurance if they lost their subsidies, leaving only the old and sick in the insurance pool. That, in turn, could have led to a dramatic rise in insurance premiums, even potentially to a point where the affected insurance marketplaces would have collapsed.

Meanwhile, the ruling leaves the ACA, which Republicans have repeatedly sought to undermine since its passage five years ago, on more firm footing than ever before.  “It’s an affirmation of the ACA,” said Trish Riley, executive director of the National Academy for State Health Policy. “People who have had a wait-and-see attitude will have to say it’s time to move on.”

The decision also “secures the legitimacy” of health-care marketplaces run by the federal government, said Allison Hoffman, a professor of health care law and policy at the University of California, Los Angeles. In the months leading up to the decision, some states had begun to move away from such set-ups: Pennsylvania, Delaware, and Arkansas had all asked for and received approval to take over the exchanges that the federal government had been running for them. But now, said Hoffman, some states will take the opposite approach, and abandon their own exchanges for a federally run option.

In large part this is due to the difficulties states have had running their exchanges. A Washington Post investigation published in May found that more than half of the state-run marketplaces have faced financial challenges stemming from unreliable technology, costly customer service call centers and other issues. Many state exchanges had been relying on financial support from the federal government to stay afloat. But that support ends next year. After today’s decision, states are likely to see the federally run exchange as both a financially efficient, and politically secure, option.

“This will, I think, breathe new life into the federal marketplace,” Riley said.

While a big relief to health consumer advocates and supporters of the ACA, today’s decision was not a surprise. After the court originally agreed to hear the case, the outcome was considered a tossup. Justices Ginsburg, Breyer, Sotomayor and Kagan were clear votes for the defense, while Justices Thomas, Scalia, and Alito were considered to be locks for the plaintiffs. Pundits were unsure where Justice Kennedy (who is often the swing vote on many of the court’s close decisions) and Chief Justice Roberts (who delivered the decisive vote in a 2012 ruling upholding key sections of the ACA) would land.

But following oral arguments in early March, the tide seemed to change.

During the arguments, Kennedy appeared to express concern that a decision to repeal the ACA subsidies would unconstitutionally coerce states to adopt new legislation in response to the rescission of their insurance markets. “Perhaps you will prevail in the plain words of the statute,” Kennedy told the challengers' lawyer, but “there's a serious constitutional problem if we adopt your argument.”

Meanwhile, despite his reputation as one of the more vocal members of the court during questioning, Roberts was relatively silent, asking just one question at the very end of the arguments that appeared to telegraph his ultimate decision. At the time, Solicitor General Donald Verrilli, representing the federal government in the case, was encouraging the court to give the Obama administration “Chevron deference” when Roberts interrupted.

“If you’re right about Chevron, that would indicate that a subsequent administration could change that interpretation?” asked Roberts. As Jeffrey Toobin, the legal analyst for The New Yorker, suggested at the time, this could be, ideologically, Roberts’ way out of the case. By voting to uphold the Obama administration’s actions, he would essentially be confirming the power of the executive branch, a principle salient to Republicans. And in the meantime, he would avoid inflicting potentially devastating damage not only on the millions of individuals whose health insurance was at risk, but also to the flow of billions of dollars through the insurance companies, drug manufacturers and healthcare providers on the exchanges.

Throughout the proceedings, President Obama had sought to tamp down concern that the law’s subsidies provision would be overturned. “I’m confident we’ll win, because the law is clearly on our side,” Obama said Monday on Marc Maron’s podcast WTF

King was likely the last significant legal challenge to the ACA. While there are more than a dozen other ACA-related disputes pending in the federal court system, they have all been “repeatedly dismissed,” writes Timothy Jost, a professor of health care policy and law at Washington and Lee University. “The courts have held that the plaintiffs bringing these cases have not in fact suffered an injury from the laws or administration actions that they challenge, and thus the federal courts have no jurisdiction to hear their complaints. The grievances raised by these cases are political and should be addressed to the political branches, not to the courts.”

That doesn’t mean, however, that the law’s opponents will be cowed by today’s decision. The Republican-led Congress is almost certain to find new ways to challenge the legitimacy of the law.

"Obamacare is fundamentally broken, increasing health costs for millions of Americans. Today's ruling doesn't change that fact," House Speaker John Boehner said in a press release shortly after the decision. "[W]e will continue our effort to repeal the law and replace it with patient-centered solutions that meet the needs of seniors, small business owners, and middle-class families."

Congress may attempt to pass a reconciliation bill to change the law in its entirety, said Jost, or pass smaller measures to chip away at contentious provisions of the ACA, such as a “Cadillac tax” on generous health care plans.

“But anything they do will have to be signed by the president,” said Jost. For now, with Obama still in office, that means the GOP won’t be able to gain much traction. But, he added, moving forward, “everything probably depends on the next presidential election.”

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