Supreme Court Rules 6-3 to Save Obamacare Tax Subsidies

Supreme Court Upholds Obamacare Tax Subsidies

The U.S. Supreme Court upheld a core component of President Barack Obama’s health-care law, backing tax credits used by millions of Americans to buy insurance and preserving the landmark measure that will define his legacy.

The 6-3 ruling eliminates the most potent legal challenge to a law designed to cover at least 30 million uninsured people and averts a collapse in state insurance markets.

Chief Justice John Roberts and Justice Anthony Kennedy joined the court’s four Democratic appointees in the majority. They said the 2010 Affordable Care Act allows tax credits in all 50 states, not just the 16 that have authorized their own online insurance exchanges.

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” Roberts wrote. “If at all possible, we must interpret the act in a way that is consistent with the former, and avoids the latter.”

The ruling is the high court’s second in three years to preserve Obamacare in the face of Republican-backed legal attacks. Republican opponents now must look to winning the White House in the 2016 election if they hope to roll back the law.

‘Here to Stay’

The Affordable Care Act “is here to stay,” Obama said at the White House.

“What we’re not going to do is unravel what has now been woven into the fabric of America,” the president said. “I can work with Republicans and Democrats to move forward. Let’s join together. Make health care in America even better.”

Hospitals led a rally among health-care companies after the ruling. HCA Holdings Inc., the largest for-profit hospital chain, gained 8.8 percent to $90.72 at 4 p.m. in New York. Tenet Healthcare Corp. jumped 12.2 percent and Community Health Systems Inc. added 13.0 percent.

Stock gains at insurers were smaller, in part because subsidized customers make up a small proportion of the total at the biggest firms. UnitedHealth Group Inc., the largest U.S. health insurer, rose 2.7 percent to $122.33.

The decision also helps ease the path to dealmaking among health insurers. Bloomberg News reported today that Aetna Inc. could reach a deal to acquire Humana Inc. as early as this weekend. Anthem Inc. went public with a bid for Cigna Corp. on June 20 that Cigna rejected.

Groups representing hospitals and doctors praised the ruling. Steven Stack, the president of the American Medical Association, said his group is “relieved.”

The American Hospital Association said the decision was a “significant victory for protecting access to care for many of those who need it.”

Republican Response

A ruling against the administration might have forced more than 6 million people to drop Obamacare policies because of tripling and even quadrupling premiums.

Republicans have tried repeatedly to kill the law since it was enacted. Senate Majority Leader Mitch McConnell, a Kentucky Republican, urged Democrats Thursday to work with his party to alter the law.

“The politicians who forced Obamacare on the American people now have a choice: crow about Obamacare’s latest wobble towards the edge, or work with us to address the ongoing negative impact of a 2,000-page law,” McConnell said in a speech on the Senate floor shortly after the ruling was issued.

Democrats said the ruling should send a signal to Republicans.

“Stop wasting the time of the American people by trying to repeal a law,” said Senate Minority Leader Harry Reid of Nevada. “Enough’s enough. Let’s move on.”

Four Words

The legal fight centered on a four-word phrase. The measure says people qualify for tax credits when they buy insurance on an exchange “established by the state.”

The four Virginia residents challenging the law said that phrase meant subsidies weren’t available in at least 34 states that never authorized their own exchanges. Residents of those states instead use the federal healthcare.gov system.

Roberts said that other parts of the law suggested that “established by the state” might include the federal exchange.

He said the challengers’ interpretation would produce results Congress didn’t intend, creating insurance “death spirals” as all but the sickest -- and most expensive -- consumers dropped their policies.

“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,” Roberts wrote. “It is implausible that Congress meant the act to operate in this manner.”

‘Inartful Drafting’

Roberts said the challengers’ arguments about the law’s language “are strong” and that the measure was laden with “inartful drafting.”

“But in every case we must respect the role of the legislature and take care not to undo what it has done,” he wrote. “A fair reading of legislation demands a fair understanding of the legislative plan.”

Justices Kennedy, Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan joined Roberts’s opinion.

Justices Antonin Scalia, Samuel Alito and Clarence Thomas dissented, saying the law was susceptible to only one interpretation. Scalia called the majority opinion “pure applesauce” and “interpretive jiggery-pokery,” reading a summary of his dissent from the bench to give it added emphasis.

Scalia

“We should start calling this law ‘SCOTUScare,’” Scalia wrote. The ruling sends the message that “the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites,” he said.

As the justices prepared to release the ruling, dozens of interns from labor unions and liberal groups gathered outside the marble building, holding up signs showing the number of insured people at risk of losing their insurance in individual states. After the decision came in, the young people pasted stickers onto the signs to say “still covered.”

The challenge was spearheaded by the Competitive Enterprise Institute, a Washington-based advocacy group. Its general counsel, Sam Kazman, called the ruling a “a tragedy for the rule of law in our country.”

In a divisive clash three years ago, the justices upheld another of the law’s core provisions, its requirement that people either acquire insurance or pay a penalty. Roberts joined the court’s four Democratic appointees in the majority in that case, with Kennedy in dissent.

That ruling also gave states more freedom to opt out of the law’s expansion of the Medicaid program for the poor. Twenty-two states have refused to expand Medicaid, reducing the number of people eligible for subsidized insurance by almost 4 million, according to the Kaiser Family Foundation.

“At this juncture, now that the Affordable Care Act is affirmed as a stable part of the American health-care system, we can move on,” Ron Pollack, executive director of Families USA, said of the court’s latest decision. It “has produced enormous progress and now that progress will continue.”

The case is King v. Burwell, 14-114.

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