The Supreme Court has spoken, and the Affordable Care Act (ACA) has survived yet another near-death experience. In a decisive opinion, written for six of the Court’s nine justices, Chief Justice Roberts upheld the Internal Revenue Service (IRS) rule that allows low-and moderate-income Americans access to tax credits, regardless of whether they live in states where the federal or state government operates the marketplace.
The Background
King v. Burwell is one of four cases that have been brought by ACA opponents asking the courts to invalidate an Internal Revenue Service rule that allows federally facilitated exchanges (FFEs, also called federally facilitated marketplaces) to make available advance premium tax credits to help Americans purchase health insurance.
The Affordable Care Act reformed health insurance underwriting to prohibit insurers from considering preexisting conditions in deciding whether to cover individuals and determining how much enrollees are charged in premiums. It also required individuals who could afford coverage to get coverage or pay a penalty. To ensure that insurance was affordable, the ACA offered premium tax credits to low- and moderate-income people.
These tax credits were offered through entities that were called “exchanges” in the legislation, and are now called marketplaces. The exchanges were intended to increase competition among insurers and augment the choices available to enrollees, but also to provide an access point through which tax credits could be made available to help pay premiums as they became due on a monthly basis.
The Senate version of the ACA — which was eventually adopted by both houses with modifications that could be made through the Health Care and Education Reconciliation Act — located the exchanges in the states. It provided, however, that if a state chose not to establish its own exchange, the Department of Health and Human Services would provide “such exchange” for the states.
Dozens of provisions in the ACA indicate that the federally facilitated exchanges were supposed to function just like the state-operated exchanges. One provision of the law, however, which added section 36B to the IRS code to provide for the tax credits, twice refers to enrollment through an “Exchange established by the State” as a seeming condition of eligibility for tax credits.
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Contact Steven G. Cosby, MHSA, Group Health Insurance Broker and Agent with Cosby Insurance Group, with questions or to request more information and to schedule a healthcare plan evaluation, savings analysis or group plan solution for your company.
