Supreme Court Upholds Subsidies

On June 25th, 2015 the Supreme Court upheld ObamaCare’s subsidies 6-3 in a ruling on King V Burwell. Millions will keep their legal HealthCare.Gov subsidies and the IRS will continue to be able to issue subsidies to those who buy plans on the federal website.

In other words ObamaCare (the Affordable Care Act) remains the “law of the land”.

The truth is 7 in 10 polled didn’t know that King V. Burwell was happening or that subsidies were in danger of being repealed. Had the plaintiffs won millions could have lost health coverage and it could have sent us down a road to losing our new benefits, rights, and protections (including guaranteed issue for those with preexisting conditions).

As it stands this news may pass many people by, but make no mistake today is a historic day in the history of American healthcare.

Read the Supreme Court decision upholding Obamacare subsidies here.  Below we present our own summary of the King V Burwell decision in simple terms.

The Supreme Court Decision on King V Burwell Explained

Not everyone has the time to read the Supreme Court decision on King V Burwell, but understanding why SCOTUS ruled in favor of subsidies rather than the plaintiffs can help you understand the ACA, Supreme Court, Congress, the legal system, and the history of health care reform.

Below is a quick overview of everything you need to know to understand this in plain simple terms:

In the 1990’s a few states, including Massachusetts, decided to make it so insurers had to offer coverage to those with preexisting conditions (making coverage guaranteed issue). Things went bad fast, people loved the new rule… but instead of getting coverage they waited until they were sick to get covered. Insurers lost money and some even left the states creating an “economic death spiral”.

In 2006 Massachusetts (under Mitt Romney and with the help of Jonathan Gruber btw) fixed the above problem by adding a two crucial missing pieces to the puzzle, they added 1) tax credits (ie. health insurance subsidies) and 2) a fee for not obtaining coverage during a specific time of the year (along with exemptions for those who still couldn’t afford coverage). The mandate doesn’t work without tax credits, this is because without tax credits people with incomes below 400% of the Federal Poverty Level statistically end up paying more than the key 8% of their incomes for coverage. If everyone is exempt from the law and people can buy coverage whenever, then the whole thing falls apart and it creates an “economic death spiral”.

Fast forward to 2010, President Obama passes a very similar healthcare reform law in the style of the successful Massachusetts reform. The new law, the Affordable Care Act, also has 3 key pieces: 1) health insurance options for everyone 2) subsidies 3) and a mandate. The wording of the 1,000 pages isn’t perfect and some sections are a little questionably written… but when read in whole and in context the meaning of each section becomes clear. It is meant to mirror the reforms that worked in Massachusetts and is meant to accomplish the 3 things listed above.

Fast forward to King V Burwell. 4 plaintiffs (organized by Conservative Libertarian think tanks in an effort to bring down the ACA) said they should be exempt from the mandate. They said that a part of the law says only “exchanges established by the state” (one of those not so well written sections) should get subsidies and thus they shouldn’t get subsidies, thus they should be exempt from the requirement to get coverage as coverage would cost more than 8% of their income. (The plaintiffs live in Virginia and Virginia didn’t set up their own exchange).

Fast forward to the King V Burwell ruling. The Supreme Court decides 6 – 3 that despite the section of the law being poorly written, that when read in context the law must be read to mean that the 3 key pieces stand. In the passage “the state” must be referring to states or the federal government, as that is the only way the law would make sense in context. Why would congress pass a law meant to mirror the Massachusetts law and then in only one section sneak a part in there undoing 2 of the 3 key pieces for all states that failed to create their own exchange? Congress must have meant “the state” to refer to both states and the federal government.

The lawsuit didn’t rest upon one of the key parts, whether it was up to the IRS to interpret the meaning of the law as experts (“the Chevron defense”). This is because the decision said the law itself was clear enough on its own. The Affordable Care Act is written to mean that all states can issue subsidies whether they have set up their own exchange or whether the federal Government sets up that exchange for them.

Summary: SCOTUS says congress would not have passed a law that treated some states differently than others. Giving some states the failed 1990’s version of healthcare reform and giving other states the fixed Massachusetts / ACA version based on whether they created an exchange themselves or deferred creation to the federal government would make no sense. When the whole law is read in context the intentions of the ACA are clear. For the ACA to work we must have:

1. Open Enrollment / a Mandate

2. Guaranteed coverage

3. Premium Tax Credits

This decision hints that further healthcare reform proposals, including a future repeal attempt by the GOP must include or address all three of these points.