Resource Center

Supreme Court Upholds Health Insurance Subsidies

In the case of King v. Burwell (Case Number 14-114), petitioners argued that the language of the Affordable Care Act (ACA) specifically provides that health insurance subsidies can only be issued through state-based exchanges (also referred to as marketplaces) and not through the federal exchange. In a 6-3 decision issued June 25, the U.S. Supreme Court upheld the ACA by confirming that health insurance subsidies may also be offered through the federal exchange.

What is the issue?

A goal of the Affordable Care Act (ACA) is to provide more Americans with access to affordable health
care. One of the ways the ACA attempts to make health care affordable is through federal subsidies that
reduce insurance premiums and out-of-pocket costs for eligible consumers who purchase health insurance
through a health insurance exchange. At issue is a specific provision in the ACA authorizing
subsidies for health-care coverage purchased "through an exchange established by the State." The IRS has interpreted the law to include
subsidies for health insurance purchased through either state-based exchanges or the federal exchange.
The petitioners alleged that the IRS could not promulgate regulations to extend tax-credit subsidies to
coverage purchased through exchanges established by the federal government.

What did the Court decide?

Writing for the majority, Chief Justice John Roberts acknowledged that the language of
the ACA relative to exchange tax credit provisions is ambiguous. However, given the intent of the ACA as a
whole, "the statutory scheme compels us to reject petitioners' interpretation because it would destabilize
the individual insurance market in any state with a Federal Exchange, and likely create the very 'death
spirals' that Congress designed the act to avoid."

Citing studies that suggest that eliminating the tax credits could lead to insurance premiums increasing by
as much as 47%, while enrollment might decrease by upwards of 70%, Roberts opined that "it is
implausible that Congress meant the act to operate in this manner."

What states have their own exchanges?

As gleaned from the Court's majority opinion, 16 states and the District of Columbia operate their own state-based
exchanges. These states include California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland,
Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Vermont, and
Washington. The federal government operates exchanges in the remaining states. Most consumers access
federal exchanges through the federal government website,

What if the Court ruled against the ACA?

According to the Wall Street Journal, more than 6 million people would have lost health insurance tax credits if
the Court ruled against the ACA. As of March 2015, the Department of Health and Human Services
estimates that 16.4 million are covered due to the ACA.

Please be advised that this material is not intended as legal or tax advice. Accordingly, any tax information provided in this material is not intended and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. Data and information is general in nature and not meant as specific to any particular situation. As such, you should not act on this information and should seek advice based on your particular circumstances from a qualified advisor.

Information provided has been prepared from sources and data we believe to be accurate, but we make no representation as to its accuracy or completeness. Wealth Dimensions Group, Ltd, your advisor, nor any of the data and content providers, such as Forefield, shall be liable for any errors or delays in the content, or for the actions taken in reliance therein.

Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2012.