SCOTUS Grants Cert in King v. Burwell

In what could be very important news this afternoon regarding the Patient Protection and Affordable Care Act (“PPACA,” or more commonly called “Obamacare”), the Supreme Court of the United States announced that it was granting certiorari in the case of King v. Burwell, decided on July 22, 2014, by the United States Court of Appeals for the Fourth Circuit.

As readers are aware, PPACA’s reform aims include increasing the number of Americans covered by health insurance. PPACA established health insurance exchanges for uninsured consumers to purchase their own private health insurance.  PPACA delegated the establishment of the exchanges to each state and direct the Secretary of Health and Human Services (“HHS”) to establish and operate an exchange in any state that declined to do so.

In King, the issue was whether a statutorily-granted subsidy to the state health care exchanges created under the Affordable Care Act also applied to the federal exchanges.  The subsidy not only lowers the real cost of an exchange insurance policy, but the amount of the subsidy is used to calculate the income level that determines whether a consumer must purchase insurance, and is therefore subjected to penalties if he or she fails to obtain insurance coverage.  The PPACA statute is not explicit as to whether that subsidy applies to the federal exchanges. However the Internal Revenue Service issued a regulation which declared that the subsidy was available to consumers on both federal and state exchanges.

The plaintiffs in King challenged that interpretation, but the Fourth Circuit upheld the IRS regulation.  I recapped the issues at stake and decision in King and the contrary decision in Halbig v. Burwell–where the D.C. Circuit coincidentally, and on the same day, decided that subsidy only applied to the state exchanges–in my monthly health law column in the September 2014 issue of the Albany County Bar Association Newsletter (scroll to page 15).

The subsidy issue is important because it is widely accepted that the economic viability of the PPACA requires universal tax credits in order to maximize enrollment and provide premium income from healthier beneficiaries to cover those with more intensive health care needs.  Many commentators fear that if a large number of consumers are able to opt-out of purchasing health insurance, thus upsetting the economics of PPACA, then the future of the law and its policy aims are grim unless a legislative solution to correct PPACA’s language can be found.

Now, although sooner than expected, the Supreme Court will decide the issue.  The Court’s action also essentially moots the Halbig decision, which was suspended pending en banc review by the D.C. Circuit.

For questions on this post, please contact David Nardolillo, Esq.