King v. Burwell: Background and Implications

by Amanda Weidner

December 8, 2014

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The case of King v. Burwell was granted a writ of certiorari on November 7th, 2014, to be heard by the United State Supreme Court in June 2015. The case challenges the IRS’s expansion of the Patient Protection and Affordable Care Act’s (PPACA) main taxing and spending provisions. The issue asks whether or not Section 1321 of PPACA permits the IRS to “promulgate regulations to extend tax-credit subsidies to coverage purchased through exchanges established by the federal government.” Essentially, this case will decide whether or not the federal government has the authority to provide tax subsidies to consumers whose states chose not to set up statewide insurance exchanges under PPACA. Since 36 states declined the set-up of a state exchange, the IRS was forced to create federal exchanges to provide for the millions of Americans who couldn’t obtain coverage. 4.6 million Americans have obtained coverage using this exchange.

The 4th Circuit United States Court of Appeals unanimously rejected the challengers’ arguments. The challengers contend the PPACA legislature only allows for subsidies on state-run insurance exchanges, and the regulations implemented by the IRS that allow for both state-run and federal exchanges override the authority granted to Congress in the law.

If the Supreme Court overrides the decision in the 4th Circuit Court of Appeals, the 4.6 million Americans in the 36 states without state-run exchanges could lose their tax credits, and therefore likely lose their health insurance as well. Many people feel that if successful, this challenge will undermine the economic foundation of PPACA, thus jeopardizing the future of Obamacare. The subsidies provided through the federal government are critical to the overarching goal of PPACA: to provide health insurance for every citizen regardless of their financial situation. Without the federal support, affected insurance markets could end up with skyrocketing premiums, essentially pushing Americans back into the health care conundrum that existed before PPACA.

The timing of the Supreme Court granting this case certiorari has great political implications. To date, two separate three-judge panels have heard King v. Burwell and a similar case; these cases have resulted in conflicting opinions. Each case has been appealed en banc, meaning the losing side has asked for a rehearing before a full nine judge court, and these cases are currently pending. Usually, SCOTUS waits until lower courts finish their consideration of the case before agreeing to hear a case. However, the Court deciding to step in immediately, perhaps prematurely, indicates the significance this case holds for millions of Americans’ futures with health care. Estimates by the Urban Institute claim that by 2016, 11.8 million Americans will receive insurance through federal exchanges, with 7.3 million receiving subsidies. The loss of these subsidies would make insurance unaffordable for most, if not all, of the newly insured Americans. The question then becomes much more about the timing of the case rather than the outcome of the two competing cases in the lower courts. Rather than waiting until 2016 when 11.8 million Americans will have bought insurance with the promise of it being subsidized, the Court could clarify this issue now and provide transparency and fairness to millions of people affected by this massive law.

Much of the hype surrounding this case has predicted a dire future for Obamacare and the health care system in America. If the conjectures of a chaotic future are accurate, then the Supreme Court made the right move in resolving this confusion expeditiously and definitively.