Skip to content Skip to navigation

Supreme Court Hears ACA Subsidies Challenge

Tags:  (2015 Mar 6th)

The Supreme Court will decide in King v. Burwell  whether subsidies provided under the Affordable Care Act (ACA) can be provided to those who obtained health insurance through the federal exchange. As drafted, the ACA limits subsidies to those who sign up for health insurance through exchanges “established by the State.” The Internal Revenue Service (IRS) which administers the tax subsidy program, has interpreted the subsidies provision in the ACA as applying to all exchanges. The court will decide whether the ACA should be “literally interpreted” and that Congress’ intent was that only participants in state established exchanges would receive subsidies or whether the subsidies provision is a textual error and that looking at a “broader approach” it’s clear that Congress intended for all exchanges to allow for subsidies.

Currently, there are 36 states that participate in the federal exchange. About five million people have received subsidies through the exchange, with the average subsidy being about $4,700. This case has a potentially large impact, the Rand Corporation estimates that eliminating the subsidies provided for people who purchase coverage through federally run health insurance markets would sharply boost costs and reduce enrollment to 4.1 million people. It is estimated that unsubsidized individual market premiums would rise by 47% due to the loss of younger, healthier individuals who could no longer get subsidies.

Oral arguments were held on March 4th and a decision is expected by the end of June.