by Douglas L. McSwain, Partner, Wyatt, Tarrant & Combs LLP
*This post is part of the ACSblog King v. Burwell symposium.
On March 4, 2015, the Supreme Court of the United States (SCOTUS) will hear King v. Burwell, a lawsuit attacking premium assistance tax credits under the Affordable Care Act (ACA) for those who live in states where the only Obamacare health insurance marketplace is the federal “exchange,” i.e., Healthcare.gov.
The King v. Burwell Dispute: Text vs. Context
Background: The ACA grants tax credits, based on income level, for individual health insurance purchased in the Obamacare marketplaces, also known as “exchanges.” These credits may be claimed as premium assistance subsidies for a health plan selected by the taxpayer. In 2015’s open enrollment, over 9 million people purchased plans in the federal exchange, and of those about 87 percent, or over 7.5 million, purchased with premium subsidies. The King case questions the legality of these subsidies, and its outcome may determine whether 7.5 million or more taxpayers can continue to purchase insurance.
There are two types of Obamacare marketplaces: state exchanges and the federal exchange. The ACA created the federal exchange for individuals who live in states that refuse or fail to set up their own state exchange. Currently, a total of 37 states do not have state exchanges, and those states’ taxpayers must use the federal exchange.
The King Challengers’ Argument: Premium subsidies are not allowed in the federal exchange. The ACA’s text creating the tax credit only provides for subsidies in “an Exchange established by the State.” The federal exchange has not been established by any state. So, no tax subsidies can be provided in it, and taxpayers who live in the federal-exchange states cannot benefit from subsidies.
The King challengers’ argument is simple: “textualism” is supreme, and the specific statutory text creating the tax credit is controlling!
The Obama Administration’s Response: The text creating the tax credit cannot be taken out of context. The challengers read it myopically, in spite of the ACA’s whole text and meaning, and in disregard of the law’s overall intent.