The Supreme Court on Wednesday will hear oral arguments in King v. Burwell, a case challenging the legality of tax credits allowed to purchase health insurance under the Affordable Care Act. The issue is the wording of the IRS rule that says individuals qualify for subsidies when they buy health insurance through an exchange “established by the state.” Only 13 states and the District of Columbia have established their own exchanges, with the rest of the country using the federally facilitated marketplace.

This isn’t the first time the Supreme Court will be ruling on the health care law. In 2012, the high court ruled 5-4 to uphold the ACA — in National Federation of Independent Business v. Sebelius — a case that focused on a requirement for most Americans to get health coverage or pay a penalty. The individual mandate, as it’s referred to, went into effect Jan. 1, 2014.

This time around, it’s matter of how the law was written and its intent, said Marcy Buckner, senior director of state affairs for the National Association of Health Underwriters. “This is not a question of constitutionality, but of statute,” she said last week at the NAHU Capitol Conference in Washington, D.C.

“This case is not about drafting error, which a lot of people are saying,” Buckner said. “The language in question that required the tax credit recipients to enroll in coverage through an exchange established by the state appears twice explicitly in the tax credit eligibility rules and several times by cross reference.

“It was added to the text at multiple stages of the legislative process, including under the supervision of Senate leaders and White House officials. This is not a drafting error and even the administration does not argue that.”

Also see: Six states urge Supreme Court to uphold ACA subsidy challenge

The plaintiffs, four Virginia residents, argue the law puts a financial burden on them. Virginia uses the federal exchange. Without tax credits, Buckner said, the plaintiffs would not be subject to the individual mandate due to a hardship exemption that says a person is exempt if the cheapest plan available costs more than 8% of the individual’s income.

With the subsidies, they would be forced to buy insurance or pay the penalty. Although it’s counterintuitive, the tax credits working in tandem with the individual mandate do impose a financial burden on the plaintiffs, Buckner said, and that’s “why they do have standing to challenge this in the courts.”

The Obama administration has said the law’s intent is to provide subsidies for everyone, not just those who purchased coverage through a state-based exchange.

Legislators could remove any potential ambiguity by amending the law, Buckner said, “but with the makeup of the current Congress, it is unlikely that there will be any congressional action to clarify the language.”

Also see: Halbig v. Burwell ruling

Previous conclusions from lower courts will hold not any bearing when the Supreme Court reviews this case, Buckner said. In July, the U.S. District Court for the Eastern District of Virginia upheld the validity of subsidies offered to individuals on the federal exchange — and on the same day, a three-judge panel on the D.C. Circuit Court of Appeals declared those same subsidies invalid. Less than four months later, the Supreme Court agreed to review the case.

Also see: SCOTUS to review ACA subsidies

 “We all thought they were going to wait for the second case to be heard,” Buckner said, but the Supreme Court surprised everyone when it decided to hear the Republican-backed appeal of the decision from Virginia’s District Court. 

Four justices have to agree to hear a case, Buckner said, so it’s likely that at least that many are leaning toward ruling against the subsidies. Still, Buckner said she doesn’t know which ruling the court will hand down this summer. “I can’t tell you the future,” she said. “It will be an exciting day in June to see what happens.”

Other than interpreting the law, the Supreme Court could remand to a lower court. “That’s not likely in this case because they only do that if something was wrong in the procedure of how it got to them,” Buckner said. “And we don’t have any inclination that that will happen here.”

If the court rules in favor of the plaintiffs, the number of uninsured Americans would increase by 8.2 million, according to the Urban Institute. A large exodus from the marketplace would likely follow a ruling against subsidies as FFM plans would become too expensive for many consumers, Buckner said. Premium would skyrocket, increasing between 122% and 774%, depending on the state, according to Washington-based consultancy Avalere Health. Residents in in Mississippi (774%) and Alaska (449%) would see the highest increases.

Also see: What happens if ACA subsidies are ruled illegal?

A ruling against the subsidies “would not strike down the ACA or effectively repeal it,” Buckner said. would still exist and the law would continue to be implemented — but without the support of tax credits, she said.

“Regardless of the decision … the ACA as a whole will not be struck down,” Buckner said. “It may be crippled a little bit. But it will not be paralyzed. It could possibly come back.” 

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access