June 25, the Supreme Court upheld one of the central tenets of the Affordable Care Act (ACA). The Court ruled that the federal government can legally provide tax credits to help low- and middle-income individuals and households purchase health insurance. The Court’s decision leaves the current health system intact, which means that nothing should change for you, your family, friends or coworkers. The law still requires Americans to have health insurance and large employers — those with more than 50 full-time employees — to provide health insurance for their employees. What follows is a summary of the decision.
Background: King v. Burwell
The ACA created marketplaces, known as exchanges, where individuals can shop for health insurance. Under the ACA, the IRS provides tax credits to purchase health insurance through exchanges for individuals and households with incomes between 100 percent and 400 percent of the federal poverty threshold. The law allows states to create their own exchanges, and it also allows the federal government to step in and run exchanges when states refuse to create their own. Currently, the federal government runs exchanges in 37 states that declined to create or run their own exchanges. These are considered federal exchanges since they are run by the federal government, and not by the respective states. King v. Burwell focused on five words in the ACA — “exchange established by the State”— and was filed to determine whether the federal government can legally provide tax credits to purchase health insurance through federally created exchanges. The plaintiffs argued that no one in these 37 states should be eligible for tax credits because the exchanges were created by the federal government and are not an “exchange established by the State.”
Supreme Court’s Rationale
The ACA contains four primary provisions (see table). If any of these four provisions were removed or struck from the law, the fundamental structure of the ACA would become compromised. Premiums would increase and insurers would leave the marketplace, destabilizing the entire health insurance system.
Summary of the Affordable Care Act (ACA):Primary Provisions:
1. Prevents denial of coverage by insurers due to health reasons, and bars insurers for charging higher premiums due to health reasons;
2. Requires individuals to maintain health insurance or pay a fee, unless insurance costs exceed 8 percent of their income;
3. Provides tax credits to individuals with incomes between 100 percent and 400 percent of the federal poverty line to make health insurance more affordable
4. Requires the creation of exchanges in each state, allowing individuals to compare and buy insurance plans. In instances where states refuse to create exchanges, the federal government steps in to establish and run them.*
*List of States with federally run exchanges:
AL, AK, AZ, AR, DE, FL, GA, IL, IN, IA, KA, LA, ME, MI, MS, MO, MT, NE, NV, NH, NJ, NM, NC, ND, OH, OK, OR, PA, SC, SD, TN, TX, UT, VA, WV, WI, WY
Where statutory/legislative language is clear, the Supreme Court is required to enforce that language as stated. However, in instances of ambiguity — as in the ACA language under scrutiny here — the Court must read words “in their context and with a view to their place in the overall statutory scheme.” The small portion of the ACA in question is ambiguous, so the Court had to look at the broader structure of the bill to determine its compatibility with the rest of the law and the intent of Congress. Although it could have interpreted the phrase’s “plain meaning” — causing widespread disruption in the marketplace and working against Congress’ intent in passing the ACA — the Court, in short, said that poor writing skills and ambiguity shouldn’t be used to deny tax credits to help people purchase health insurance. The larger intent of the law, and Congress’ passage of the bill, was to expand access to health insurance.
How King v. Burwell Impacts NRPA Members
While King v. Burwell focused on the legality of tax credits, some of you may have additional concerns about the case’s effect on the employer mandate — the requirement that large employers, with more than 50 full-time employees (FTEs), provide health insurance. The Court’s decision means:
• Tax credits are still available to help low- and middle-income individuals and families purchase health insurance through federal- and state-run exchanges.
• Large employers (with more than 50 FTEs) in states with federally run exchanges are still required to provide insurance for their employees.
• NRPA members residing in states that run their own exchanges will still have to comply with the requirements of the ACA. King v. Burwell had no bearing on operations or individuals in those states.
What does King v. Burwell mean for you?
Yesterday’s decision means NRPA members don’t have to worry about more changes to the health care system in the immediate future. Current law still requires individuals to maintain health insurance, and large businesses to provide insurance for their employees.
We hope this clears up any confusion that exists about the July 25 Supreme Court decision. Feel free to email me if you have any additional questions or concerns.
Oliver Spurgeon III is NRPA’s Government Affairs Manager.