Q&A: What's the impact of Supreme Court upholding Affordable Care Act subsidies?

The U.S. Supreme Court upheld on Thursday, June 25, a key provision of the Affordable Care Act, or ACA, keeping health insurance coverage within reach for millions of Americans.

The case, King v. Burwell, resolves unclear language found in section 36B of the Internal Revenue Code, stating that ACA subsidies can only help individuals on insurance plan exchanges "established by the State."

Thirty-four states in the U.S. are reliant on the federal exchange for ACA enrollment of their residents. Now, with the court's 6-3 ruling, residents of those states can continue to access subsidies to help them pay for health coverage through the federal exchange.

We discussed the ruling with Heather Howard, director of the State Health Reform Assistance Network and lecturer in public affairs at Princeton University's Woodrow Wilson School of Public and International Affairs.

Question: How did this case come to be?

Howard: King v. Burwell addressed eligibility for subsidies for health insurance, in the form of tax credits, under the ACA. The ACA contains language stating that subsidies will be made available to make health coverage more affordable for residents through exchanges "established by the state." The U.S. Department of Treasury had interpreted the law to allow subsidies for enrollees on state exchanges or the federal exchange, also known as healthcare.gov. This case challenged that interpretation, claiming that the department overstepped its authority. The plaintiffs argued that if the department had hewed to the statutory language, subsidies would not be available in their home state (Virginia) and therefore, the individual mandate to maintain health insurance would not apply to them since affordable coverage would not be available.

Since the first open enrollment period under the ACA began in fall 2013, eligible residents in all states have been able to receive premium tax credits through the exchanges, including in the 34 states relying on the federal exchange. As a result, many Americans who once found health insurance coverage unaffordable have been able to gain coverage, and we have witnessed the largest declines in the national uninsured rate in four decades. This case hinged on whether the intent of Congress, in passing the law, was for subsidies to be available in all states or just those that established their own exchanges. Congressional debate on the law prior to its passage contained no reference to the possibility that states would have to establish their own exchanges in order for their residents to access subsidies.

Q: How did the Supreme Court rule?

Howard: In the 6-3 ruling issued by the Supreme Court, the arguments of the plaintiffs were rejected, and the court ruled that the statute meant to have subsidies available to all eligible Americans, regardless of who runs their exchange.

Legal analysts believed that the court might rule in favor of the Obama administration using Chevron deference, a decades-old principle whereby the court defers to an executive agency's interpretation of an ambiguous statute. Instead, however, the majority chose not to use Chevron because the intent of Congress was clear: enrollees in all exchanges may receive premium tax credits.

This is an even stronger ruling for the government than anticipated and means that a future president will not be able to reverse the interpretation through a different administrative interpretation. 

Q: Who is most affected by this decision?

Howard: States that have created their own health insurance exchanges were already protected from a loss of subsidies. Thirty-four states — those that did not set up their own exchanges — were susceptible to this decision, meaning that an estimated 6.4 million Americans stood to lose access to the financial assistance that helped them afford health insurance. With this decision, low- to moderate-income residents in these states will continue to have access to subsidies. Of those Americans enrolling in coverage through the federal marketplace, 87 percent receive subsidies to make this coverage affordable, and the average subsidy is $272 per month, or $3,264 per year. This helps to cover the cost of nearly three-quarters of the average premium for enrollees, many of whom were previously uninsured. Health care providers will also see this decision as a positive, as those 6.4 million will remain covered and able to access care. 

Q: What needs to be done now?

Howard: This ruling essentially continues the status quo of the ACA, and further entrenches the law as part of the fabric of the American health care system. There is still work to be done, as states continue to improve on the success that the law has seen. As we approach the upcoming third open enrollment period in the fall, the continued dissemination of best practices from leading states will be vital. In particular, exchanges have improved in the area of consumer experience, which will continue to be a priority with subsidies available to make coverage affordable for Americans across the country. Twenty-one states still have not expanded Medicaid, and insurance rates are still widely fluctuating on an annual basis. States will continue to strive for a stable and sustainable coverage system. With the national uninsured rate now around 10 percent, states can move forward in their efforts to cover the remaining uninsured, both through the expansion of Medicaid and educating consumers to the affordable coverage available through the marketplace.