In a much-anticipated decision, the U.S. Supreme Court ruled today that individuals who enroll for coverage in a health insurance exchange may qualify for a subsidy to make that coverage more affordable, regardless of whether the exchange is established by the federal or a state government. The 6-3 decision in King v. Burwell upholds the approach adopted by the Obama administration and avoids what would have been a major disruption in the implementation of the Affordable Care Act (ACA).The issue arose because provisions in the ACA that address the availability of subsidies refer to exchanges established by a state. In deciding that subsidies would also be available in situations where a state failed to act and the federal government stepped in to establish an exchange, the Court viewed the subsidy rules in the broader context of the statute and its purposes. The Court noted ambiguities in the statute, as the ACA contained provisions suggesting that Congress did not intend to draw such a meaningful distinction between state and federal exchanges. It saw the subsidies as fitting into a deliberate congressional scheme designed to make coverage affordable, so individuals would not wait until they were sick to enroll, which would, in turn, keep premiums low and insurers participating in the health insurance market. In view of the ambiguities, the context, and the statutory purpose, the Court found that the words “established by the State” did not preclude federal exchanges from offering subsidies.The decision was based on the Court’s own statutory interpretation and did not simply defer to the Internal Revenue Service’s interpretation of the ACA. Relying on earlier cases, the Court saw this issue as so fundamental to the statutory scheme that Congress would not have left it as a matter for administrative interpretation without making an express statement to that effect. This reasoning makes the extension of subsidies to federal exchanges less susceptible to change by future administrations.The dissent focused on the direct text of the ACA, interpreting the subsidy provisions literally and treating participants in federally established exchanges as ineligible to receive premium assistance subsidies.In finding the provisions ambiguous, the majority acknowledged that the ACA “contains more than a few examples of inartful drafting.”

By preserving the status quo, the decision avoids what may have been a frenetic period of activity at both the federal and state levels, primarily in how to address the affordability of coverage for millions of individuals who have obtained coverage through a federally operated exchange. It also avoids indirect, but very significant consequences, such as whether any assessments under the employer mandate (which are determined by reference to the subsidy rules) would have been imposed in states where subsidies ceased to be available.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the ACA.

For more information, please contact Jean C. Hemphill at 215.864.8539 or hemphill@ballardspahr.com, Brian M. Pinheiro at 215.864.8511 or pinheiro@ballardspahr.com, Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com, Diane A. Thompson at 424.204.4334 or thompsonda@ballardspahr.com, Robert S. Kaplan at 215.864.8417 or kaplanr@ballardspahr.com, Alisa M. Gifford at 215.864.8516 or gifforda@ballardspahr.com, or Christopher W. Welsch at 215.864.8222 or welschc@ballardspahr.com.