The controversial Affordable Care has caused debate and litigation since it was signed by the President in 2010. The Affordable Care Act embodies three reforms to overhaul the American healthcare system. First, the Act required guaranteed issue and community rating which requires health insurance providers to offer health insurance to offer health insurance policies to everyone within a given territory, without medical underwriting. Second, the Act issued a national mandate requiring individuals to maintain health insurance coverage, or pay a fine to the IRS. Lastly, the Act seeks to make healthcare more affordable through giving refundable tax credits to individuals with household incomes between 100% and 400% of the federal poverty line. The Act also requires the creation of an “Exchange” in each state which functions as a marketplace which allows individuals to shop for different insurance plans. The Act states that the federal government will establish an exchange if a state does not. The Act supplies that tax credits shall be allowed for any applicable tax payer, but only if the taxpayer has enrolled in an insurance plan through an exchange established by a state. An IRS regulation interprets that the language as making tax credits available on an exchange regardless of whether the exchange is established by a state or HHS. The ambiguities within the Act’s language and the IRS’s regulation caused confusion.
The petitioners in this case were four individuals who lived in Virginia, which has a federal exchange. They did not want to purchase health insurance. The petitioners filed suit alleging that Virginia’s federal exchange did not qualify as an exchange created by the state as defined by the IRS regulations, so they should not receive any tax credits. This case challenged the IRS rule. The Supreme Court held that while the rule was ambiguous, it should be interpreted in a way that “is compatible with the rest of the law”. Justice Roberts wrote “(t)his is not a case for the IRS…. It is instead our task to determine the correct reading of the law.” Justice Roberts further stated that reading the law in a way which meant tax subsidies were available for purchasers on both federal and state exchanges was “what Congress meant to do.”
In the past, Congressional Republicans have criticized the Act’s vague language. Bill Frist, the former Republican Senate majority leader stated the Supreme Court’s ruling captured the intent of the law better than the legislative language did initially. An impact this ruling may have is the erosion of the state run marketplace. As many states discovered, once the law went into effect, the task of creating and operating exchanges is costly and cumbersome. If there is no downside to refusing to create an exchange, many states will happily rely on the federal exchange for citizens to buy healthcare.
Overall, this decision provides a significant victory for the Affordable Care Act. The tax credits are a one of the law’s key reforms, providing billions of dollars in spending each year and affecting the price of health insurance for millions of people. Had the decision gone in favor of the petitioners, 6.4 million people in 34 states would have lost tax subsidies which would allow them to afford health insurance. By resolving the ambiguity of the Act in favor of the Federal Government, the Supreme Court gave the law the force it required for full enactment. The Court’s ruling also grants the Executive Branch significant discretion in implementing the Affordable Care Act.