Tax Credits Will Continue Through All ACA Exchanges
Posted by Anne Phelps, Deloitte Advisory Principal, US Health Care Regulatory Leader on June 25, 2015.
Basis for the decision
In the majority opinion, Chief Justice John Roberts wrote that “the Act’s context and structure compel the conclusion that [Internal Revenue Code] Section 36B allows tax credits for insurance purchased on any Exchanges created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.”
The Supreme Court based its decision on a reading of the statute and Congressional intent to resolve the underlying issue in the case. Thus, the Supreme Court’s decision is not based on the Administration’s regulatory interpretation of the statute.
In comments in the Rose Garden, President Obama said, “After multiple challenges to this law before the Supreme Court, the Affordable Care Act is here to stay.”
Speaker of the House John Boehner (R-OH) said, “ObamaCare is fundamentally broken, increasing health care costs for millions of Americans. Today’s ruling doesn’t change that fact. Republicans will continue to listen to American families and work to protect them from the consequences of ObamaCare. And we will continue our efforts to repeal the law and replace it with patient-centered solutions that meet the needs of seniors, small business owners, and middle-class families.”
The decision in the case marks the second time that the Supreme Court has ruled on a challenge to a major coverage provision of the ACA. The life sciences and health care sectors have been awaiting the Court’s decision with great anticipation given its potential impact on the health care marketplace. The American Hospital Association, America’s Health Insurance Plans, the Pharmaceutical Research and Manufacturers of America, and other health care industry groups filed briefs with the Supreme Court supporting the Administration’s position.
Background of the case
The plaintiffs in King vs. Burwell are residents of Virginia, one of the 34 states where HHS currently runs a federally-facilitated Exchange. The plaintiffs asserted that they do not wish to purchase coverage under the ACA, and that if premium assistance tax credits were not provided through the federally-facilitated Exchange in Virginia, they would be exempt from the penalty under the ACA’s individual mandate because the cost of coverage would be unaffordable to them under standards created by the ACA.
The plaintiffs challenged a final rule issued by the Department of the Treasury and the IRS on premium assistance tax credits created under the ACA. The plaintiffs argued that the IRS exceeded its authority in the rule by making available premium assistance tax credits through federally-facilitated Exchanges, citing a provision of the statute that says premium assistance tax credits will be available in “an Exchange established by the State.”
1 “March 31, 2015 Effectuated Enrollment Snapshot,” Centers for Medicare and Medicaid Services, June 2, 2015.
Deloitte Advisory Senior Manager
Deloitte & Touche LLP