King v. Burwell
The ACA provides that individuals can purchase competitively-priced health insurance on American Health Benefit Exchanges (“Exchanges”) that may be run by either the States or the federal government. It also authorizes a federal tax credit for low- and middle-income individuals who purchase insurance on the Exchanges. The Internal Revenue Service (“IRS”) issued a regulation confirming that the federal tax credit is available to all financially eligible Americans, regardless of whether they purchase insurance on a state-run or federally-facilitated Exchange.
The plaintiffs in King filed a lawsuit in the United States District Court for the Eastern District of Virginia, arguing that the ACA authorizes tax credits only for individuals who purchase insurance on state-established Exchanges. The district court rejected the plaintiffs’ arguments and granted the government’s motion to dismiss the case. The plaintiffs in King appealed the decision to the United States Court of Appeals for the Fourth Circuit, and CAC filed an amici curiae brief in the Fourth Circuit on behalf of members of Congress who led the enactment of the ACA, including then-Senate Majority Leader Harry Reid and House Minority Leader Nancy Pelosi, as well as state legislators who served during the period when their state governments were deciding whether to create their own Exchanges. The Fourth Circuit held that the IRS regulation confirming that tax credits and subsidies are available to individuals purchasing health insurance through the federal as well as state Exchanges was a “permissible exercise of the agency’s discretion.” The plaintiffs asked the Supreme Court to hear the case, and it agreed to do so.
In the Supreme Court, we again filed an amici curiae brief on behalf of current and former members of Congress who were actively involved in the debates over the ACA and more than 100 current and former state legislators, all of whom were active in their states’ deliberations about whether to create their own state-based Exchange. Our brief explained that the purpose of the tax credit provision is to facilitate access to affordable insurance through the Exchanges, and it demonstrated that there is no evidence in the legislative history of the ACA to suggest that Congress ever intended or communicated to the States that the availability of the tax credit depended upon the establishment of a state Exchange. In fact, we showed that the opposite was true: everyone, including amici members of Congress, understood that tax credits would be available to purchasers on all of the Exchanges. Further, state government officials never understood the tax credits to be limited to state-run Exchanges. Rather, as the state legislator amici knew from their own experiences, the States considered many factors in deciding whether or not to set up their own Exchanges, and the possibility that not setting up a state-run Exchange would result in the loss of tax credits to the State’s citizens was never one of those considerations.
On June 25, 2015, in a 6-3 ruling, the Court rejected the ACA’s challengers’ arguments, as CAC had urged. In an opinion authored by Chief Justice Roberts, the Court held that tax credits are available to individuals in states that utilize a federally-facilitated Exchange. According to Roberts, 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. The Court correctly ruled that, when the text of the ACA is considered as a whole, tax credits must be available to all qualifying citizens in every state; holding otherwise, the Court explained, would disrupt the interlocking reforms Congress put in place to achieve the law’s goal of affordable health care for all Americans. With this ruling, the Court affirmed the understanding of the ACA that has been held by state governments and members of Congress since the Act’s inception—that tax credits are available to eligible citizens for insurance purchased on any Exchange created under the ACA, be it state-run or federally-facilitated.