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Supreme Court Ruling: Key Takeaways

Jul 01, 2015

Court Finds for the Government

The United States Supreme Court ruling upholding Affordable Care Act subsidies in federal-exchange states was made public on June 25, as only one of two cases released on this almost-final day of the court’s term. With its 6-3 decision, the court preserved the structure of the Affordable Care Act. Here are key takeaways of the decision.

Simply put, the ACA will remain operating under its current structure and federal subsidies in the form of tax credits will continue to flow to individuals who purchase coverage in federal-exchange states. For Health Net, this means federal subsidies will not be disrupted in the Arizona federal exchange market.

The court did not base its decision on whether the IRS had authority to issue the regulation that allowed subsidies in the federal-exchange states, instead relying on its own interpretation of the underlying law. “This is not a case for the IRS,” the court said. This is important as it prevents future administrations from interpreting the ACA in a different manner. The only way for this to be overturned in the future is to enact a change in federal statute.

The majority opinion follows the basic framework of the industry amicus brief submitted by America’s Health Insurance Plans (AHIP). AHIP argued that one must look to previous attempts at health insurance reform by individual states and recognize these efforts failed to adequately acknowledge the interdependence of three health care reform principles – or the “three-legged stool” – which include

These principles, taken into account with a reading of the overall statute of the ACA, led to the majority opinion. Chief Justice Roberts wrote, “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them … [T]hose requirements only work when combined with the coverage requirement and the tax credits. So it stands to reason that Congress meant for those provisions to apply in every state as well.”

The decision is likely to stand as one of the most significant of the Roberts court because its outcome will have a direct, practical impact on so many Americans – in addition to the political implications for the Obama administration.
The Department of Health and Human Services (HHS) released an informational FAQ to explain the impact of the decision: https://www.healthcare.gov/decision/

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