In King Et Al. v. Burwell, Secretary of Health and Human Services, Et Al., No 14-114 (June 25, 2015), the Supreme Court held that Affordable Care Act Section 36B’s tax credits are available to individuals in states that have a Federal Exchange for insurance, but do not have a State Exchange. The Affordable Care Act adopts the guaranteed issue and community rating requirements which provide that insurers do not bar people due to their health conditions and cannot charge higher premiums due to those health issues. Second, the Act generally requires individuals to maintain health insurance coverage or make a payment to
the IRS, unless the cost of buying insurance would exceed eight percent of that individual’s income. And third, the
Act seeks to make insurance more affordable by giving refundable
tax credits to individuals with household incomes between 100 percent and 400 percent of the federal poverty line, §36B.
In addition to those three reforms, the Act requires the creation of an “Exchange” in each State—basically, a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own Exchange, but provides that the Federal Government will establish “such Exchange” if the State does not. The Act also provides that tax credits “shall be allowed” for any “applicable taxpayer,” but only if the taxpayer has enrolled in an insurance plan through “an Exchange established by the State. An IRS regulation interprets that language as making tax credits available on “an Exchange,” 26 CFR §1.36B–2, “regardless of whether the Exchange is established and operated by a State . . . or by HHS,” 45 CFR §155.20.
The petitioners were four individuals who live in Virginia, which has a Federal Exchange. They did not wish to purchase health insurance. In their view, Virginia’s Exchange did not qualify as “an Exchange established by the State under [42 U. S. C. §18031],” so they should not receive any tax credits. That would make the cost of buying insurance more than eight percent of petitioners’ income, exempting them from the Act’s coverage requirement. As a result of the IRS Rule, however, petitioners would receive tax credits. That would make the cost of buying insurance less than eight percent of their income, which would subject them to the Act’s coverage requirement.
The Court determined that Petitioners’ plain-meaning arguments were strong, but the Act’s context and structure compelled the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those credits 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.
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