The Supreme Court on Thursday ruled that subsidies for health insurance should be available to Americans wherever they reside.
At issue was a section of the Affordable Care Act (ACA) that authorizes tax credits for those who purchase coverage in marketplaces “established by the state.” Four policyholders from Virginia sued, charging that those four words meant the law did not authorize credits for taxpayers in states, like theirs, that rely on the federal health-insurance marketplace. Without subsidies, the petitioners charged, they could neither afford health insurance nor be required by law to purchase it.
That ambiguity presented the Court with the need to interpret the ACA and marked the second time since the law was enacted in 2010 that its fate fell to the justices.
A trial court dismissed the suit after finding that the ACA provided subsidies for plans purchased through either the state or federal exchanges. The 4th U.S. Circuit Court of Appeals affirmed but the Court of Appeals for the D.C. Circuit ruled, in a separate case, that the ACA limited tax credits to state exchanges only.
By a vote of 6 to 3, the Court sided with the 4th Circuit. As Chief Justice John Roberts wrote for the majority:
“If the statutory language is plain, we must enforce it according to its terms. But oftentimes the ‘meaning—or ambiguity—of certain words or phrases may only become evident when placed in context.’ So when deciding whether the language is plain, we must read the words ‘in their context and with a view to their place in the overall statutory scheme.’ Our duty, after all, is to ‘construe statutes, not isolated provisions.'” [citations omitted]
The majority agreed with the petitioners that the language of the phrase at issue was ambiguous, in that one can read it as limited to state exchanges or as applicable to both state and federal exchanges.
The ambiguity prompted the majority to look to the broader structure of the law. Congress put in place subsidies as part of a push to maximize the pool of people who are insured, the majority noted. That lowers premiums by avoiding an alternative whereby only people who need health insurance—those who are less healthy and presumably consume more health care—buy it.
The alternative, which would have denied subsidies to roughly 6.4 million people in 34 states that use the federal exchange, could upend the market for health insurance irreparably. In that event, the Chief Justice wrote:
“One study predicts that premiums would increase by 47 percent and enrollment would decrease by 70 percent… It is implausible that Congress meant the Act to operate in this manner… Petitioners’ arguments about the plain meaning of [the law] are strong. But while the meaning of the phrase ‘an exchange established by the state’ may seem plain ‘when viewed in isolation,’ such a reading turns out to be ‘untenable in light of [the statute] as a whole.’ In this instance, the context and structure of the Act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.” [citations omitted]
Congress passed the ACA “to improve health insurance markets, not destroy them,” wrote Roberts. “If at all possible, we must interpret the act in a way that is consistent with the former, and avoids the latter.