<b><i>BREAKING NEWS:</b></i> Health Care Law Subsidies Survive Supreme Court Challenge

The U.S. Supreme Court on June 25 upheld federal health insurance subsidies for an estimated 6.4 million moderate and low-income Americans.

The'ruling'was the second time in three years that the high court prevented the complete unraveling of the Obama presidency's signature legislative achievement: the 2010 Patient Protection and Affordable Care Act.

In'King v. Burwell, the 6-3 majority, led by Chief Justice John Roberts Jr., held that the health care act does not limit the subsidies, or tax credits, for health policies purchased on exchanges created only by states. The Internal Revenue Service, charged with administering the subsidies, was correct when it interpreted language in the act to make those subsidies available as well to purchases on exchanges set up by the federal government, said the majority.

'Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,' Roberts wrote. 'If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter. Section 36B can fairly be read consistent with what we see as Congress's plan, and that is the reading we adopt.'

Health care and insurance experts had predicted that a defeat for the government would have devastating effects for the law's goal of making health insurance affordable to as many Americans as possible. A RAND study found that “in scenarios in which the tax credits are eliminated, our model predicts a near 'death spiral' with very sharp premium increases and drastic declines in individual market enrollment.”

Roberts referenced RAND's “death spiral” prediction in the majority opinion, writing that it was “implausible that Congress meant the Act to operate in this manner.” He was joined by Justices Anthony Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan.

Justice Antonin Scalia, joined by Justices Clarence Thomas and Samuel Alito Jr., dissented. In a nod to the health care act's nickname “Obamacare,” Scalia said that it should be called “SCOTUScare” because the majority was effectively rewriting the law.

'The court holds that when the Patient Protection and Affordable Care Act says 'Exchange established by the State' it means 'Exchange established by the State or the Federal Government.' That is of course quite absurd, and the court's 21 pages of explanation make it no less so,' Scalia wrote.

The question before the justices was whether a provision in the Affordable Care Act provided federal tax credits or subsidies only for insurance purchased on state-created exchanges, not those operated by the federal government.

The Internal Revenue Service had issued a rule interpreting the phrase “established by the State” to authorize subsidies for purchases on both state and federally created exchanges.

The statute provided for federal exchanges as a fall back in those states that chose not to run their own exchanges. Sixteen states created their own exchanges, while the federal government runs exchanges in 34 states. An estimated 8 million people receive federal subsidies to help pay for their health insurance plans.

The majority held that the phrase “established by the State” was ambiguous, and could mean either exchanges established by individual states or by both states and the federal government. From there, Roberts said the challengers' interpretation of “state” as excluding federal exchanges was incompatible with the rest of the law because it would destabilize the individual insurance market in states with federal exchanges.

The challengers, represented by Jones Day's Michael Carvin, were four Virginia residents who claimed that but for the federal subsidies, they would have been exempt from the law's mandate that they purchase health insurance because of their incomes.

The U.S. Court of Appeals for the Fourth Circuit'unanimously rejected'their primary argument that the plain words “established by the State” limit federal subsidies to purchases on state exchanges. On the same day as that decision, the D.C. Circuit, in a separate case also brought by Carvin and the Competitive Enterprise Institute, ruled for the challengers in a divided opinion.

During arguments on March 4, Carvin pressed a text-based argument as well as the claim that Congress intended to limit the subsidies to state exchanges as inducement to create the exchanges.

The government, he said, “is coming here to tell you that a rational, English-speaking person intending to convey subsidies available on [federal] exchanges would use the phrase 'exchanges established by the state.'” The solicitor general, he added, “cannot provide to you any rational reason why somebody trying to convey the former would use the latter formulation.”

But it was Carvin's second argument ' that Congress limited federal subsidies to state exchanges as inducement to states to create their own exchanges ' that set off alarm bells for Justice Anthony Kennedy.

“It seems to me that under your argument'perhaps you will prevail in the plain words of the statute ' there's a serious constitutional problem if we adopt your argument,” Kennedy concluded.

Solicitor General Donald Verrilli Jr. argued the federal exchanges, under the challengers' reading, would be doomed to fail without subsidies. Insurance markets would descend into so-called “death spirals” in which, without subsidies, healthy persons would stop buying insurance; insurance costs would skyrocket, and the promise of affordable care for millions would be revoked.

“That cannot be the statute that Congress intended,” he said.