Affordable Care Act Upheld Once Again

June 25, 2015

After a battle in 2012 to invalidate the Affordable Care Act (ACA) as unconstitutional, the controversial law has survived another attack. The United States Supreme Court held today that the ACA, also known as Obamacare, remains unaffected by a linguistic error within the statute.

A key feature of the ACA is the requirement that there be an “exchange” in every state to allow people to shop for insurance. If a state fails to create an exchange, the law compels the federal government to create and operate an exchange within that state instead. Ultimately, most states opted not to create their own exchanges.

The ACA further mandates that tax credits be given to individuals whose household income falls below a certain level. These tax credits are then used to purchase insurance. The wording of the statute, however, is open to interpretation. The amount of tax credit an individual receives depends on whether that taxpayer is enrolled in an insurance plan through “an Exchange established by the State.” The Internal Revenue Service (IRS), in order to execute this mandate, created a regulation that grants tax credits for taxpayers who use either state or federal exchanges.

The plaintiffs in today’s decision contended that the wording of the ACA is inconsistent with the IRS rule. They argued that the ACA should be read in a way to mean that participants of state exchanges, but not federal, should be solely eligible for tax credits.

The administration’s lawyers responded by explaining that the IRS rule, including both state and federal exchanges, was the actual intention of the disputed the ACA phrase. The Court sided with the administration, stating that the Congress’s intention was to open access to healthcare for all taxpayers. Although the statute’s language is ambiguous, to interpret it to give credits only to state exchange participants would contradict the statute’s purpose.

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