Perspectives

Health Care Current: June 25, 2015

US Supreme Court rules in favor of Administration: Tax credits will continue through all ACA Exchanges

This weekly series explores breaking news and developments in the US health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

US Supreme Court rules in favor of Administration: Tax credits will continue through all ACA Exchanges

Today, June 25, 2015, the United States Supreme Court ruled 6-3 in favor of the Administration to permit federal premium assistance tax credits under the Affordable Care Act (ACA) to continue to be made available through 34 federally-facilitated Exchanges, in addition to Exchanges established by the states, to help individuals purchase Exchange coverage.

The US Department of Health and Human Services (HHS) operates federally-facilitated Exchanges in states that have not established their own Exchanges under the ACA. Of the 7.3 million people who enrolled via ACA Exchanges in the open enrollment period for 2015 in states with federally-facilitated Exchanges, 87 percent were determined eligible for premium assistance tax credits.1

HHS currently operates federally-facilitated Exchanges in 34 states. Fourteen states (including the District of Columbia) as of 2015 have established their own Exchanges, and three states are considered to have state-based Exchanges but use the HealthCare.gov platform.

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.”2

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.

The path forward
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 Supreme Court’s decision with great anticipation given its potential impact on the health care marketplace.

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.”3

The Court’s decision could drive some states to take the ACA back into their own hands and work toward establishing their own state-based Exchanges, but the looming 2016 presidential elections could prompt other states to continue to let HHS run their Exchanges while they wait to see what legislative and regulatory changes to the law will be made by a new Administration and Congress.

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PS. For more information on the decision and background on the King vs. Burwell case, see the Reg Pulse Blog post, “US Supreme Court rules in favor of Administration: Tax credits will continue through all ACA Exchanges.”

Sources:
1“March 31, 2015 Effectuated Enrollment Snapshot,” Centers for Medicare and Medicaid Services, June 2, 2015.
2Supreme Court of the United States, King et al v Burwell; Secretary of HHS, et al, Certiorari to the US Court of Appeals for the Fourth Circuit, No. 14-114. Argued March 4, 2015 – Decided June 25, 2015.
3The White House Blog, “Live Updates: The Supreme Court Upholds A Key Part of the Affordable Care Act.”

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My Take

By Anne Phelps, Principal, US Health Care Regulatory Leader, Deloitte & Touche LLP

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