In a 6-3 decision the U.S. Supreme Court rejected a major challenge to the Affordable Care Act. The ruling will keep federal subsidies available to individuals who live in states that did not set up their own health care exchanges. 

At issue for the Justices was whether the program of tax credits applies only to health insurance marketplaces “established by the state,” and not at the federally-run sites. The Act’s economic model depends on tax subsidies being widely available, but only 16 states have established their own health care exchange sites.

In states whose marketplace had not been set up, 6.4 million (of the total 10.2 million signed up with the ACA) were receiving subsidies. Had the Court ruled the IRS was misinterpreting the decision, many feared it would’ve sent the ACA into a “death spiral,” given that 87 percent of the nation accessed financial assistance to purchase plans through the marketplace. If, under Section 36B, the IRS was not rightfully dolling out subsidies, the marketplace would spike causing members to leave, which would only make the marketplace more expensive.

Credit: ryanoshea
Credit: ryanoshea

The issue all came down to the interpretation of one section of the text, and as Chief Justice John Roberts writes in his opinion, the wording is less than ideal, but the majority of the Court had trouble believing could be interpreted as state sites only:

The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. … It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation. But those requirements only work when combined with the coverage requirement and the tax credits. So it stands to reason that Congress meant for those provisions to apply in every State as well.

As R. Pepper Crutcher Jr. writes on the Affordable Care Act Review blog, the pro-ACA decision may mean big changes for anyone holding out for the Court to strike down the ACA:

If [the Government’s interpretation wins], nothing changes, legally, but much changes practically. That’s because so many employers have tried to wait-out the ACA, hoping for political or judicial relief from its burdens. With a few exceptions (e.g., the Cadillac Plan tax), this appeal is their last hope. If they guessed wrong, there will be a mad scramble for hurried advice and assistance, some of which will be reliable.

Some also wonder if the Court’s decision could open the door for future lawsuits to have more freedom in interpreting laws with vague wording. But for now, ACA rests easy.