In a 6-3 decision written by Chief Justice Roberts and issued this morning, the U.S. Supreme Court in King v. Burwell ruled in favor of the Obama administration. In doing so, the Court held that premium subsidies offered under the Affordable Care Act (ACA) may be provided to individuals in states that use an Exchange established by the federal government. This is the second time the Court has upheld key provisions of the ACA since it was enacted in 2010.
Background. The King case involved an interpretation of a provision of the ACA which provides that premium subsidies are available to lower-income individuals who purchase coverage “through an Exchange established by the State.” For more detail on the parties and their specific arguments, please see our prior newsletter U.S. Supreme Court Hears and Argues Case over ACA Subsidies.
The Court’s Decision. The Court determined that, in the context of the ACA as a whole, the phrase “Exchange established by the State” was ambiguous. It could be read as either limited to only the 17 Exchanges established by individual states and the District of Columbia, or it could be read more broadly to also include Exchanges established by the federal government on behalf of the 34 states that chose not to create their own exchanges.
To resolve this ambiguity, the Court looked at (i) how the word “Exchange” was used throughout the ACA, (ii) the ACA’s fundamental purposes, and (iii) how each of the ACA’s “three Key Reforms” were intended to work together to achieve those purposes. In light of these considerations, the Court determined that the premium tax subsidy applies to coverage purchased on all Exchanges – both those established by a state and those established by the federal government.
The Dissent. In a bitterly worded dissent written by Justice Scalia and joined by Justices Thomas and Alito, these three justices disagreed with the majority’s determination that the language was ambiguous. They also disagreed with the majority’s reasoning that the law as a whole dictated a reading that was contrary to the words’ plain meaning. In fact, Justice Scalia lamented, “Words no longer have meaning if an Exchange that is not established by a State is ‘established by the State’.” Noting that this is the second case and third issue on the ACA that the Court has, in his opinion, improperly upheld the law by effectively rewriting it, Justice Scalia commented “We should start calling this law SCOTUScare.”
What This Means for Employers. The Court has now upheld the ACA twice in the face of challenges that would have undermined the employer mandate. Large employers need to continue complying with the employer mandate to avoid penalties. In addition, all employers need to continue preparing for (i) the ACA’s reporting requirements that first must be satisfied in 2016 for 2015; and (ii) other provisions, like the Cadillac tax, which go into effect in the future. Unless Congress changes the law or additional challenges reach the Court, it appears that the ACA will remain in effect as is and will continue to impact healthcare for all employers and individuals.
Contact Information. For more information from Mazursky Constantine, please contact Don Mazursky (404.888.8840), Amy Heppner (404.888.8825), Kelly Meyers (404.888.8838), Angela Roberts (404.888.8822). For additional information from VCG Consultants, please contact Leslie Schneider (770.863.3617).