Last week the Supreme Court heard arguments for a case challenging the constitutionality of a key aspect of the Affordable Care Act (ACA). Popularly called Obamacare, the Act was passed by Congress and signed into law by President Obama in 2010 and has since been the butt of many a political battle.
This is the second time around for the Affordable Care Act, which in 2012 landed at the Supreme Court with a case questioning the legality of forcing people to get insurance or pay a fine. Ultimately though, the Supreme Court upheld the ACA with a 5-4 ruling.
So what do you need to know about the new case?
What it’s called:
King v. Burwell.
What’s being asked:
Under the ACA, each state must have an “exchange” through which health insurance is sold to residents. States can either operate the exchange themselves or have the federal government do so in their place.
Obamacare mandates that every individual must buy insurance (on the exchange or otherwise) with only a small unaffordability exemption for those with particularly low-incomes. In order to minimize the number of exempt people, Obamacare allows the Internal Revenue Service (IRS) to issue tax credits, often called “subsidies,” to people who sign up on the exchanges. Subsidy amounts differ based on the specific insurance plan.
The question being raised to the Supreme Court is whether people who live in states where the federal government operates the exchange are qualified to receive subsidies. This is pertinent because the exact terminology in the ACA’s discussion of subsidy calculations only refers to state-run exchanges. So essentially, the question challenges the reading of the Act by the government, specifically the IRS, which is currently providing subsidies for state-run and federally-run exchanges.
Both sides presented arguments on March 4. The Justices will issue an opinion before the summer recess, starting at the end of June.
In the 90 minutes during which the Justices heard arguments, Michael Carvin defended the rights of his clients, four Virginians who currently get subsidies from the IRS but argue they should not. Virginia is one of many states that use the federally-operated exchange and Carvin argues his clients should not be recipients of subsidies based on the Act’s language. Essentially, they want to be freed from the health insurance mandate altogether by having a low enough income to claim exemption.
In defense of the government’s reading, Solicitor General Don Verrilli argued that Congress’ policy goal was never to exclude residents of states with federally-run exchanges from the subsidy provision. The section in question, he argued, was rather insignificant in the overall scheme of the Act’s intent and refers only to how to calculate subsidy amounts.
More generally, ACA-opponents argue the subsidy clause was intentionally limited, essentially giving an incentive for states to run their own exchanges. Proponents of the government’s current reading disagree, asserting this was never an intended incentive and that this more concise reading is not in the spirit of the overall act.
Where the Justices stand:
Pro-subsidies for residents of all states: Justices Elena Kagan, Sonia Sotomayor, Stephen Breyer and Ruth Bader Ginsburg
Anti-subsidies for residents of all states: Justices Antonin Scalia Samuel Allito
Still in play: Chief Justice John Roberts (who was reportedly rather quiet during the arguments, but upheld the ACA in the deciding vote in 2012) and Anthony Kennedy (who appears leaning toward the government, but still questioning)
Who this affects:
If you are resident in a state with an exchange run at the federal level, your tax credits are at risk if the Justices decide to side with Carvin and his clients. Thirty-four states currently utilize the federal exchange (with three more managed by the government), meaning over 7.5 million Americans’ subsidies are in jeopardy. Given the Republican majority, it is highly unlikely that Congress would get involved in the event of a victory for ACA-opponents.
Last week, Justice Sotomayor also stated her fear that without subsidies possible in all states, only sick people would enroll in insurance plans, prices would spike once again and more Americans would have to drop their plans because of prohibitive costs, amounting to what she referred to as a “death spiral.”