Supreme Court allows premium tax credits in federal exchanges.

• Author: Schreiber, Sally P.

On June 25, the Supreme Court issued a much-anticipated decision in which it upheld the availability of premium tax credits under the Patient Protection and Affordable Care Act (PPACA), PL. 111-148, when they are provided through health exchanges run by the federal government (King v. Burwell, No. 14-114 (U.S. 6/25/15)).

In a 6-3 opinion written by Chief Justice John Roberts, the Court found that, although the meaning of the term "established by the State" in Sec. 36B was ambiguous, when read in the context of the entire statutory scheme and its purpose of stabilizing the health insurance market, it is "implausible" that Congress intended to limit the availability of the premium tax credit in states with federal exchanges.

The Court did not use a Chevron analysis to determine whether the IRS's interpretation of the ambiguous statute was reasonable. The Court said it would not defer to the IRS in interpreting the law because the IRS has no special expertise in health care policy: "This is not a case for the IRS" (slip op. at 8).

Instead, the Court looked at the purpose of the health care law, which it said was designed to solve a specific problem of spiraling health insurance costs that grew out of control in the United States in the 1990s. The chief justice wrote that without the subsidies made available through the premium tax credit, the health insurance markets in the states where the credits would not be available would undergo economic "death spirals" that would thwart the law's purpose (slip op. at 15).

According to the Court, PPACA was enacted in response to many failed attempts to reform the health insurance market in the United States. To provide health insurance for more people, many states prohibited insurance companies from denying insurance to people because of preexisting conditions and prohibited the companies from charging more for sick people, which generally resulted in higher premiums. As a result, many people waited until they were sick to get insurance, which further raised premiums and also led to insurers' leaving the insurance market in those states. These policies created an "economic 'death spiral'" for those states' health insurance markets (slip op. at p. 2).

The federal health insurance law was designed to solve those problems by adding two things to the requirements that all people be covered and rates remain the same despite health. Based on the model in Massachusetts, the federal government added (1)...