The Affordable Care Act survived its second major challenge at the U.S. Supreme Court on Thursday. In a 6-to-3 decision, the justices ruled that the Internal Revenue Service can continue to provide health-insurance subsidies to middle-class people living in all states.
At issue in the case, King v. Burwell, was whether the subsidies should go to residents of the roughly three dozen states that use the federal health-insurance exchange, in addition to those who live in states that run their own exchanges.
It’s a highly technical difference, but had the decision gone the other way, Obamacare might have unraveled. Individuals who receive these subsidies make less than $48,000 per year, and many would struggle to afford health-insurance plans without the government’s financial help. Health-policy analysts feared that, without the subsidies in place, healthy people would withdraw from the health-insurance exchanges in large numbers. That, in turn, would cause premiums to skyrocket, making insurance unaffordable to almost anyone who does not receive insurance coverage through their jobs.
The Affordable Care Act gave states the option to either set up their own exchanges or to rely on the federal government’s marketplace through Healthcare.gov. The part of the law that describes the subsidies said they should only apply to people in the exchanges “established by the state.” The plaintiffs in the King case said that clause meant the IRS was offering subsidies to residents of federal-exchange states illegally.