June 30, 2015 Practice Points

SCOTUS: PPACA Provides Tax Credits for Insurance Purchases Nationwide

The Court upheld the critical section 36B of the Affordable Care Act.

By David Dobin

On June 25, the Supreme Court issued a 6–3 decision in the case of King v. Burwell, No. 14–114 (U.S. 2015). The majority, in an opinion authored by Chief Justice Roberts, held that the section 36B of the Internal Revenue Code, 26 U.S.C. § 36B, which was enacted in the Patient Protection and Affordable Care Act, 124 Stat. 119 “allows tax credits for insurance purchased on any Exchange created under the Act.”

At issue was the interpretation of 26 U.S.C. § 36B(b)–(c), which provides that the amount of the tax credit depends on whether the taxpayer has enrolled in an insurance plan through “an Exchange established by the State [under 42 U.S.C. § 18031]." The plaintiffs, residents of Virginia, argued that, pursuant to 26 U.S.C. § 5000A(e)(1) they were exempt from the act's requirement to purchase health insurance because they were not eligible for the tax credits as Virginia did not establish an exchange and the cost of insurance exceeded eight percent of their income.

The majority concluded that the phrase "an Exchange established by the State [under 42 U.S.C. § 18031]" includes any exchange established by the federal government relying on the ambiguous text of the entire Affordable Care Act, the broader structure and context of the phrase within the Affordable Care Act.

The dissent, written by Justice Scalia, attacked the majority's reasoning as flawed, arguing that "the Court's interpretation clashes with a statutory definition, renders words inoperative in at least seven separate provisions of the Act, overlooks the contrast between provisions that say 'Exchange' and those that say 'Exchange established by the State,' gives the same phrase one meaning for purposes of tax credits but an entirely different meaning for other purposes, and (let us not forget) contradicts the ordinary meaning of the words Congress used." King v. Burwell, No. 14–114 (U.S. 2015) (Scalia, J., dissenting), at 14.

Keywords: litigation, young lawyers, Affordable Care Act, Obamacare, litigation

— David Dobin, Cohen and Wolf, P.C., Bridgeport, CT


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