Affordable Care Act Again Survives Latest Legal Challenge

The U.S. Supreme Court today in King v. Burwell, Case No. 14-114, rejected a significant challenge to the Affordable Care Act, holding that tax credits for purchased insurance may be provided to persons who are enrolled in a health insurance exchange created by the federal government. It was argued that the tax credits could only be given to persons enrolled in an exchange “established by the State….” per the language of the Act. If the Supreme Court agreed with that interpretation that would mean that persons in states who did not create health insurance exchanges would be frozen out of receiving the tax credits.

Critical to the decision was the Court’s disagreement with the assertion that the language “established by the State….” was plain and unambiguous. The Court held that, when it was read in context, this language was ambiguous insofar as it could be read as meaning only exchanges established by a state or exchanges established by both the states and federal government. Once the Court determined that it could treat this language as ambiguous it therefore was able to review its meaning within the broader structure of the Affordable Care Act to ascertain its precise meaning. The Court held that if it accepted the argument advanced by those challenging the law it would effectively destroy the very purpose for which the Act was enacted and that Congress could not have intended such a result. In sum, the tax credits are necessary in order for a federal exchange to function and the Court rejected the claim that a contrary result was ever intended by Congress.