July 08, 2015 Practice Points

How the Supreme Court Saved the Affordable Care Act

By Sathima Jones

In a 6–3 decision on June 25, 2015, the Supreme Court (SCOTUS) ruled on portions of the Affordable Care Act (ACA) that will assure the law has a place in the American legislature after President Obama leaves office in 2017.

The law has faced challenges on constitutionality in the past concerning a number of different issues. In those cases, the primary concerns were whether the federal government could lawfully enforce the individual mandate, essentially forcing people to buy health care; and whether the requirement for employers to provide contraceptives is subject to a religious objection. This time around, the law came to task, and passed, based on a particular interpretation of a phrase in the act regarding state and federal based exchange networks.

The ACA is structured to increase the overall number of insured throughout country, whereby lowering the individual cost of insurance. The law utilizes mechanisms, including mandates, subsidies, and insurance exchanges (state- and federal-run markets to purchase insurance) toward that end. Upon the inception of the ACA, each state was encouraged to establish its own marketplace, but nearly three dozen states neglected to do so. Thus, the federal government facilitated an exchange in those particular states.

In the recent case of King v. Burwell, the issue concerned interpretation of a phrase in the ACA that appeared to allow subsidies only for people buying insurance on a state-established exchange markets. The plaintiff argued that the phrase referring to markets "established by the state" allowed only for federal subsidies for low-income Americans purchasing insurance on state-founded exchanges. Interpretation in this way would have left the ACA in shambles and millions of Americans without health insurance.

If the King ruling had been against the constitutionality of federal tax subsidies in states without a state-run marketplace, the ACA would have been dismantled. Marketplaces in nearly three dozen states would be dismantled until each state established its own marketplace. This would have affected more than 6 million people who already get their insurance through the federal marketplace. Without the availability of tax subsidies, the cost of insurance would skyrocket for Americans purchasing in the marketplace. The rising cost of insurance would then affect the individual mandate, which requires all Americans to purchase insurance if the cost-to-income ratio is low; the cost would be so high that the mandate would be inapplicable to most people. The employer mandate would also be affected, because the employer only faces penalties when an employee receives tax credits for the purchasing insurance.

In a bold move, the six-justice majority saw the potential fallout of the law and saved the ACA from destruction. In the majority opinion, authored by Justice John Roberts and joined by Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan, the justices took direct consideration of the ACA's goals in deciding how to interpret the phrase "an exchange established by the state. They based their ruling on the premise that "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them….If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter." According to the majority, because the phrase "an Exchange established by the State" is ambiguous as it relates to tax credits, the Court must look to the broader text and structure of the Act to determine the meaning of that phrase. In a dissent authored by Justice Scalia, joined by Thomas and Alito, the justices reasoned that the interpretation of the phrase is very textually straightforward and called the majority's reasoning interpretive jiggery-pokery used to push a liberal agenda. Regardless of the majority's motives, it appears that the Affordable Care Act is safely a part of the American legislature for the foreseeable future.

Keywords: minority trial lawyer, litigation, Affordable Care Act, King v. Burwell, health care

Sathima Jones is a law clerk for the NJ Superior Court, Civil Division, in Newark, New Jersey.

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