Insurance premium subsidies will continue to flow to Americans in all states under the Affordable Care Act, the U.S. Supreme Court decided 6-3 in King v. Burwell on Thursday.
The justices sided with the Obama administration in the historic decision, saying the healthcare law allows Americans in all states—not just those that established their own exchanges—to receive the subsidies.
Chief Justice John Roberts and Justice Anthony Kennedy were the swing votes in the case, siding with the more liberal justices.
“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” Roberts wrote in the opinion. “If at all possible, we must interpret the act in a way that is consistent with the former, and avoids the latter.”
An estimated 6.4 million Americans receive the subsidies in the 34 states that don't have their own exchanges, in many cases relying on them to afford their health insurance, according to HHS.
Many had worried a decision in the opposite direction would lead to a dramatic spike in the nation's uninsured and the disintegration of the healthcare law itself.
The challengers in the case pointed to one part of the law that says subsidies are available only to those who enroll through an “exchange established by the state.” The federal government, however, argued that the law's purpose is clear in allowing Americans in every state to be eligible for subsidies and that other parts of the law indicate that.
In siding with the Obama administration Thursday, the justices refused to consider the phrase “exchange established by the state” in isolation. Instead, they looked at the broader context and structure of the law.
“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,” Roberts wrote in the opinion.
He wrote the subsidies “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.”
The Internal Revenue Service has interpreted the law to allow subsidies in all states, but the four individual plaintiffs in the case said that interpretation was wrong. The Supreme Court, however, refused to entertain that idea in their opinion.
The justices declined to apply what's known as the Chevron doctrine, an oft-cited precedent that says federal agencies must follow the letter of the law where the law is clear. Under the doctrine, if a law is ambiguous, courts must defer to a government agency's reasonable interpretation of it.
The justices said in their opinion it's extremely unlikely Congress would have delegated interpretation of the law to the IRS, so the Chevron doctrine wasn't appropriate for this case.
“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,” Roberts wrote in the opinion.
Michael Cannon, a director of health policy studies for the libertarian Cato Institute and a key thinker behind the legal challenge, said Roberts' decision not to apply Chevron didn't make sense.
“If the IRS is not authorized to make that decision, to resolve that ambiguity, why is the Supreme Court?” Cannon said. “The Supreme Court is even further from the people. It's even less accountable.”
Some had speculated that if the court had used the Chevron doctrine to decide the case—finding the language of the law ambiguous and allowing the IRS' interpretation—future presidential administrations could have re-interpreted the statute and pulled the plug on subsidies.
Roberts didn't seem to want to expose the law to that type of uncertainty by applying the Chevron doctrine, said Ankur Goel, a partner with McDermott Will & Emery who co-authored an amicus brief siding with the government on behalf of the American Public Health Association.
“Here, it's really because of the magnitude of the issue, the magnitude of the dollars that are being expended," Goel said. "To say different administrations could change the ruling didn't seem to Justice Roberts like the right answer."
Nick Bagley, an assistant professor of law at the University of Michigan, said Roberts' decision not to apply the Chevron doctrine, means the subsidies are likely here to stay.
“It makes it impossible for a future administration to rethink the IRS' rule,” Bagley said. “It's hard to see how the administration could have won bigger.”
Dissenting in the decision were Justices Antonin Scalia, Samuel Alito and Clarence Thomas. In a dissenting opinion penned by Scalia, they criticized the majority for performing “somersaults of statutory interpretation."
Scalia said King v. Burwell, along with the last Supreme Court opinion over the ACA in 2012, “will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.”
Scalia argued that the phrase “established by the state” is clear. Context matters, he said, but should be used as a tool for understanding laws, “not an excuse for rewriting them.” He added that the context of the ACA actually undermines the majority's reading.
“Words no longer have meaning if an exchange that is not established by a state is 'established by the state,' ” Scalia wrote. “It is hard to come up with a clearer way to limit tax credits to state exchanges than to use the words 'established by the state.' ”
But Tim Jost, law professor at Washington and Lee University and a prominent ACA proponent, countered that the majority made the only logical decision.
“It was obvious from the beginning that Congress intended the federally facilitated as well as state exchanges to grant premium tax credits, and if the court was willing to read the statute as a whole and not just focus on four words, it could not avoid that conclusion,” Jost said.
Others, however, agreed with Scalia.
“In the end, the court once again had to rewrite the plain text of Obamacare, in the words of Justice Scalia, to save the Affordable Care Act,” said Josh Blackman, an assistant professor at South Texas College of Law who filed an amicus brief in the case on behalf of the Cato Institute siding with the challengers.
Blackman added that it was curious that Roberts pointed out in his opinion that key parts of the law were written behind closed doors rather than through the traditional legislative process. Roberts also noted that much of the act was passed using a complex budgetary procedure known as reconciliation, which limited chances for debate and amendment.
“Basically this law was not passed in the manner that was appropriate for such a significant piece of legislation,” Blackman said. “The court said we're not going to hold them to it.”
Jay Sekulow, chief counsel of the American Center for Law and Justice, even argued the court “clearly overstepped its authority.”
President Barack Obama, however, said in remarks leading up to the decision that the Supreme Court should never have taken the case.
Votes by four Supreme Court justices are needed to agree to hear a case. It's likely the three most conservative justices voted to take the case, raising questions about who that fourth justice was who agreed to hear it.
It's impossible to know, but Bagley suggested either Roberts or Kennedy may have been concerned about the government's position but was later persuaded by the government's arguments. (Kennedy voted in 2012 against the Affordable Care Act's individual insurance mandate, while Roberts joined the majority upholding the law in that case.) Or it's possible one of them was always leaning toward siding with the government and just wanted to settle the matter once and for all.
“We can only speculate, and there are a lot of different stories you could tell,” Bagley said.