- The Affordable Care Act’s Tax Credit Provision Will Stand Trial Before the Supreme Court of the United States
- January 16, 2015 | Authors: David M. Kall; Susan Millradt McGlone
- Law Firm: McDonald Hopkins LLC - Cleveland Office
On Friday, November 7, 2014, the United States Supreme Court agreed to hear a new challenge to the Patient Protection and Affordable Care Act (ACA). This is the second time it will contemplate the ACA’s constitutionality. In the first case, National Federation of Independent Business v. Sebelius, the Court concluded that the individual mandate provision, which requires most Americans to obtain health insurance or pay a penalty, was a valid exercise of Congress’ power under the U.S. Constitution’s taxing clause. The clause gives Congress its power to “lay and collect” taxes.
This time around, in King v. Burwell, the Supreme Court will consider the legality of the ACA’s premium tax credit provision. The case originates from the United States Court of Appeals for the Fourth Circuit, which is the court with appellate jurisdiction over the district courts in the state of Virginia. There, the court refused to stop the government from extending eligibility for the tax subsidies to individuals who purchase their health insurance on a federally facilitated insurance marketplace, known as an exchange.
The crux of the conflict is statutory language that can be interpreted to either allow - or disallow - individuals who purchase their health insurance on a federal exchange to receive a tax subsidy to reduce the cost of the insurance. The Internal Revenue Service (IRS) says that the ACA entitles individuals to receive subsidies regardless of whether they purchase their insurance on a state run or federally facilitated exchange.
Others read the actual language of the ACA and contend that the subsidy is only available when an individual purchases his insurance on a state-established exchange.
If this sounds familiar, that is because it is. As we wrote here last month, a federal trial court in Oklahoma recently concluded that the word “exchange” only includes state established exchanges, as set forth in the explicit language of the ACA itself. According to SCOTUSBlog.org, the government recently appealed that ruling to the U.S. Court of Appeals for the Tenth Circuit. In light of the Supreme Court’s acceptance, the Justice Department now plans to ask the appeals court to put the case on hold while the Supreme Court takes up the issue.
As other courts conclude cases on the tax subsidy question, we can expect additional motions to hold in abeyance pending a Supreme Court decision.
No circuit split
It is notable that the Supreme Court accepted King even though there is no circuit split to be resolved. As it currently stands, the Fourth Circuit is the only circuit with a decision on record. According to SCOTUSBlog.com, the Circuit Court for the District of Columbia recently vacated a July 22, 2014 ruling that would have caused a split. In that decision, a three-judge panel held that the subsidies are only legal when purchased on a state-operated exchange.
Only 16 states and the District of Columbia have set up such exchanges; the remaining 34 rely on federal exchanges. In light of this, the ruling could cripple the ACA. For that reason, the Obama administration sought a review in front of the entire court, which the court granted.
The ACA remains in full force
Secretary of Health and Human Services Sylvia Mathews Burwell, speaking at a Center for American Progress event reported on by the Cleveland Plain Dealer, said that despite this potential disruption, the “most important thing for consumers to know is that nothing has changed” relative to the open enrollment period that began on November 15, 2014.