Supreme Court Saves Obamacare - Again
Concluding that the phrase “an Exchange established by the State” needs to be read in context, not in isolation, the U.S. Supreme Court today ruled against a challenge to the income tax credits provided under the Affordable Care Act – a challenge which, if it had been successful, would have essentially killed Obamacare. Under today’s opinion, individuals who live in states with federal insurance exchanges remain eligible for the ACA tax credits, and correspondingly, subject to the ACA’s individual coverage mandate.
The 6-3 majority opinion in King v. Burwell concluded that, in spite of what Chief Justice Roberts charitably calls “inartful drafting,” a “fair reading” of the “established by the State” clause requires reading it to include exchanges established by the federal government for states that chose to not establish their own exchanges. The Court analyzed the legislative intent of the ACA and the primary interrelated elements of the ACA – guaranteed issue insurance policies, the individual coverage requirement, and tax credits to make coverage affordable – as well as walking through a plausible, if somewhat strained, path of statutory interpretation to include federal exchanges within the phrase “an Exchange established by the State.” In the end, the majority determined that not treating federal exchanges the same as state exchanges would result in significantly different treatment of federal exchanges and state exchanges under the ACA, for the tax credits as well as other purposes, and “it is implausible that Congress meant the Act to operate in this manner.”
Justice Scalia’s dissenting opinion called the majority’s holding “quite absurd” and bemoaned both the majority’s “interpretive jiggery-pokery” as well as the fact that “normal rules of interpretation seem always to yield to the overriding principle of the present Court: The Affordable Care Act must be saved.” The dissent determined that “an Exchange established by the State” was unambiguous, even when read in context of the ACA overall, and that tax credits should not be available to individuals who enroll in insurance through a federal exchange. Noting that this is the third major part of the ACA that the Court has “interpreted” in a manner that saves the ACA, Justice Scalia, in what will likely become the most quotable line from this opinion (and likely spawn one or more internet memes), stated “We should start calling this law SCOTUScare.”
The bottom line for employers – the ACA remains in effect. If this opinion had held that tax credits were not available to individuals in states without a state exchange, employers in those states may have been able to escape the employer shared responsibility penalties. Because those penalties are only assessed with respect to an employee who is eligible for a tax credit but is not offered coverage through his or her employer, if no employees in that state are eligible for a tax credit, the employer could not be assessed a penalty on any of those employees. Now that the Supreme Court has clarified that all employees in all states are eligible for a tax credit, regardless of whether the employee would enroll in a federal exchange or state exchange, the employer shared responsibility penalties remain uniform for employers in all states.