Supreme Court Saves Affordable Care Act (Again): 6-3 Decision Upholds Subsidies in King v. Burwell


Supreme Court Saves Affordable Care Act (Again): 6-3 Decision Upholds Subsidies in King v. Burwell


On Thursday, June 25, the U.S. Supreme Court ruled in King v. Burwell that subsidies made available under the Affordable Care Act (ACA) are allowable even in states that have not established an exchange, or insurance marketplace, but rely instead on the HealthCare.gov federal exchange. In so doing, the Court saved the ACA once again (and led to Justice Scalia’s rebuke in his dissent that “We should start calling this law SCOTUScare”).

The majority opinion, written by Chief Justice Roberts (as in the 2012 case upholding the ACA’s individual mandate, National Federation of Independent Business v. Sebelius), acknowledged the ACA’s complex and fractured legislative history, and the statute’s resulting failure to “reflect the type of care and deliberation that one might expect of such significant legislation.” Ultimately, the Court looked past the ACA’s “inartful drafting” to its context and structure and to the “most natural reading of the pertinent statutory phrase”: “established by the State.”

Early in the majority opinion, the Court explains the three “interlocking” reforms of the ACA – (1) guaranteed coverage, (2) the individual mandate and (3) subsidies – and how the first and second reforms could push insurance markets into a “death spiral” without the third. The combination of no tax credits and an ineffective coverage requirement would most likely lead to  a rise in premiums, a decline in individuals buying insurance, and insurers leaving the market as only the sickest individuals remain in the risk pool. Certainly that was the experience of several states that attempted health insurance reform in the 1990s.

The Court’s expressed concern with the impact of its decision on markets (after all, expenditures on healthcare in the United States now comprise 17% of the GDP) is consistent with the Roberts Court’s reputation for being pro-business. And immediately after the opinion was issued, stocks for hospital companies and health insurers rose significantly: Tenet Healthcare by 12%, Community Health Services by 10%, HCA Holdings by 9%, LifePoint Health by 7%, Humana and UnitedHealth by nearly 3%. The contextualist approach in the majority opinion stood in stark contrast to Scalia’s textualist approach and likely solidifies Roberts’ aim as Chief Justice (as stated in his 2005 confirmation hearings) “to call balls and strikes and not to pitch or bat.”

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” Roberts wrote in King. “If at all possible, we must interpret the act in a way that is consistent with the former, and avoids the latter.”

The King opinion caps a good policy week for the Obama administration (which also saw passage of the massive Trans-Pacific Partnership trade deal and the Supreme Court’s decision on same-sex marriage) and ushers in some respite from major legal challenges to the ACA, probably at least until the 2016 elections. Interestingly, the opinion grants some reprieve to Republicans – particularly the Presidential candidates – who have vocally opposed the ACA but have put forth no substantive alternate proposals for its replacement, and to states that would have faced the end of healthcare for millions of residents if the subsidies had been invalidated. As a practical matter, the King opinion buys time for ACA opponents to regroup and plan their next move. 

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