The Supreme Court on Thursday upheld a key provision of the Affordable Care Act and agreed with the Obama administration that government subsidies that make health insurance affordable for millions of Americans should be available to all.
By a 6-3 vote, a divided court affirmed an Internal Revenue Service ruling that subsidies should be available not only in states that have set up their own health insurance exchanges, but also in those where consumers rely on the federal government exchange.
The decision for the second time defused a potential conflict between President Obama and the Supreme Court over his most notable domestic achievement. While there are more challenges to come, an adverse ruling in this case would have been close to a mortal blow to the act that continues to divide the nation and its political conversation.
The court was interpreting a passage in the law that said the tax credits are authorized for those who buy health insurance on marketplaces that are “established by the state.” Chief Justice John G. Roberts Jr. said that while the law’s wording was problematic, Congress’s intent was clear.
“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,” Roberts wrote.
Roberts was joined by Justices Anthony M. Kennedy, Ruth Bader Ginsburg, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan. Opposing the decision were Justices Antonin Scalia, Clarence Thomas and Samuel A. Alito Jr.
Kennedy’s position in the majority was particularly significant. He had earlier been among the four justices who would have found the entire law unconstitutional
Scalia said Roberts, who also wrote the decision in 2012 that saved the Affordable Care Act from that challenge, has performed “somersaults of statutory interpretation” to preserve the act: “We should start calling this law SCOTUScare.”
The two cases, Scalia said, “will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.”
There was no immediate reaction from the White House, but Senate Majority Leader Mitch McConnell (R-Ky.) said the administration should not “crow” about its latest legal victory.
“Today’s ruling won’t change Obamacare’s multitude of broken promises, including the one that resulted in millions of Americans losing the coverage they had and wanted to keep,” he said in a statement
There are about 10.2 million people who had signed up and paid their premiums as of March, and 6.4 million were receiving subsidies in the 34 states that had not set up their own health insurance marketplaces.
Those consumers stood to lose their subsidies, worth about $1.7 billion a month, if the justices had agreed with the challenge.
Customers in the 16 states, including Maryland, and the District of Columbia that set up their own insurance exchanges were not at risk.
The challenge was brought by the same conservative legal strategists who fell one vote short of convincing the court that the law was unconstitutional in 2012.
This was a challenge about how the law is implemented.
Roberts noted that the law “contains more than a few examples of inartful drafting. . . Congress wrote key parts of the act behind closed doors, rather than through the traditional legislative process.”
But because the majority found the phrase “established by the state” to be ambiguous, Roberts said it was necessary to look at the intent of the whole act.
“The statutory scheme compels us to reject petitioners’ interpretation because it would destabilize the individual insurance market in any state with a federal exchange, and likely create the very ‘death spirals’ that Congress designed the act to avoid,” Roberts wrote
He rejected the challengers’ arguments that Congress intended to give the states an incentive to create their own exchanges.
To agree, Roberts said, would require rewriting the statute. “The states likely would have created their own exchanges in the absence of the IRS rule, which eliminated any incentive that the states had to do so.”
But Scalia said the majority had exceeded its power.
The decision “reflects the philosophy that judges should endure whatever interpretive distortions it takes in order to correct a supposed flaw in the statutory machinery,” Scalia wrote.
“We lack the prerogative to repair laws that do not work out in practice, just as the people lack the ability to throw us out of office if they dislike the solutions we concoct.”
The subsidies are scaled to income, and average $272 per month.
Many who receive subsidies through the federal marketplace are white and live in the South, according to a recent Urban Institute analysis. Half have full-time jobs. Many live in states such as Florida, Georgia, Louisiana, North Carolina and Texas — led by Republican officials who oppose the health-care law and have balked at setting up their own exchanges.
Another big group lives in the Midwest, in states such as Illinois, Indiana, Ohio and Wisconsin.
President Obama said recently that he did not think the court should have even accepted the case. Technically, there was no split among the lower courts that had considered the issue.
A panel of the U.S. Court of Appeals for the 4th Circuit had ruled unanimously that, while it was a close call, the IRS was within its authority to interpret the law to mean all Americans should receive the subsidies, because the statute authorized the federal health care exchange to step in for states that did not establish their own.
In a separate case involving the same issue, a panel of the U.S. Court of Appeals for the D.C. Circuit had ruled 2 to 1 for the challengers. But the full D.C. Circuit put that ruling aside to let all the court’s judges weigh in, and the argument had been scheduled.
But the challengers said the Supreme Court should decide the issue, because if they were correct, billions of dollars from the federal treasury were being illegally spent.
In the constitutional challenge in 2012, the justices upheld the constitutionality of the act on a 5 to 4 vote. Roberts sided with the court’s liberals to provide the key vote.
The subsidy case was King v. Burwell.