Supreme Court Upholds Subsidies for Obamacare

Supreme Court Upholds Subsidies for Obamacare

Supreme Court Upholds Subsidies for Obamacare

Ruling preserves tax credits for 6.4 million people in 34 states

SOURCES: June 25, 2015, ruling, U.S. Supreme Court; June 22, 2015, HealthDay/Harris Poll; Elizabeth Carpenter, director, Avalere Health, Washington, D.C.; June 5, 2015, Health Affairs blog

THURSDAY, June 25, 2015 (HealthDay News) -- The U.S. Supreme Court upheld on Thursday the legality of tax subsidies for millions of Americans who signed up for health insurance under the Affordable Care Act, sometimes called Obamacare.

The ruling means 6.4 million Americans in 34 states will continue to receive the subsidies -- sometimes called tax credits -- that help pay for their health plan premiums under the health-reform law.

The 6-3 decision, which included an affirmative vote from Chief Justice John Roberts, is the second big victory for President Barack Obama and his signature domestic achievement.

"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," wrote Roberts in the majority opinion.

The tax credits are a linchpin of the 2010 health-reform law that has been broadly criticized by most Republicans and conservatives. They view the legislation as a gross example of federal intrusion into people's lives. The main reason: Obamacare requires most Americans to have health insurance or pay a penalty.

Supporters of the law, which was championed by Obama and most Democrats, said Americans deserve affordable, comprehensive health care.

The tax credit showdown -- known as King v. Burwell -- was the latest in a string of court cases contesting core elements of the Patient Protection and Affordable Care Act. Roberts also was the key vote that upheld the constitutionality of the law in 2012.

The key point of contention in King v. Burwell was whether people in states that failed to set up their own health marketplaces, or exchanges, to buy insurance under Obamacare could qualify for the tax credits if they use the federally run HealthCare.gov online exchange.

Opponents of Obamacare insisted that, as the 2010 law was written, the tax credits could only be offered with insurance purchased through online exchanges operated by individual states. But only 13 states and the District of Columbia created their own exchanges. Most of the states that chose not to create exchanges are headed by Republicans opposed to Obamacare.

The Obama administration insisted that Congress intended to make the tax credits available to all eligible buyers, whether they use the federal HealthCare.gov exchange or a state-established exchange.

The Supreme Court agreed.

A ruling against the tax credits could have also had a major ripple effect, jeopardizing other key provisions of the health-reform law, legal experts said.

For starters, there were the 6.4 million low- and middle-income Americans in the 34 states whose tax credits hung in the balance.

What's more, millions of people would have become exempt from the law's controversial "individual mandate" -- which requires most Americans to maintain "minimal essential coverage" or pay a penalty.

A negative decision also could have potentially weakened the Obamacare mandate requiring employers with 50 or more full-time employees to provide health insurance coverage.

Under the health-reform law, individuals making up to $47,080 and families of four earning as much as $97,000 a year may qualify for tax credits to make their health insurance more affordable.

Tax credits for insurance premiums reduce monthly premiums of federal marketplace enrollees by 72 percent, on average. People who qualify for those credits pay an average of just $105 a month for health insurance, according to the U.S. Department of Health and Human Services.

A recent Avalere Health analysis found that consumers' monthly premium contributions could have jumped by 255 percent, on average, in 2015 if the tax credits were stripped away.

"It's hard to imagine someone who is young and healthy, who was getting three-quarters of their premium paid for by somebody else, is going to continue to foot that bill," Elizabeth Carpenter, an Avalere Health director in Washington, D.C., told HealthDay.

If younger, healthier people dropped coverage, "individual" or "non-group" health insurance rates in the affected states -- those that didn't create their own exchanges -- could have surged in 2016, affecting even non-subsidized buyers. (Younger enrollees are considered a key to the success of the Affordable Care Act because they tend to be healthier and their premiums are designed to help offset the expenses of older Americans, who are more likely to be sick.)

Only one in five Americans wanted to see the tax credit subsidies eliminated, a HealthDay/Harris Poll released this week found. About 45 percent supported continuing the subsidies and 36 percent said they weren't sure.

Even Republicans said they were loath to halt the subsidies, the poll found. Only 36 percent of Republicans said they wanted the subsidies ended outright, while 24 percent said people should continue to get the subsidies and 39 percent said they weren't sure.

More information

For more on the tax credits created by the Affordable Care Act, visit the Internal Revenue Service.

To read what the future likely holds for the Affordable Care Act, click here.

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