Supreme Court Agrees to Take Up Potentially Crushing Obamacare Challenge

The U.S. Supreme Court on Friday announced it will take up a legal challenge brought by conservative forces against the Affordable Care Act, the law claimed by the Obama adminstrative to be its signature domestic policy achievement.

The challenge to the sweeping legislation that overhauled many aspects of the for-profit U.S. healthcare system is directed at whether or not federal subsidies designed to make now-mandated private insurance policies more affordable can be offered to people who live in states that decided against establishing their own insurance exchanges and instead opted to depened on exchanges built by the federal government.

As the Washington Post reports:

The challenge focuses on four words in the massive bill. It said people would qualify for tax credits when they buy insurance in a market "established by the state."

Only 14 states have established such exchanges. The law authorized the federal government to establish exchanges in those states that did not act, and it has done so.

Under a rule issued by the Internal Revenue Service, consumers can claim tax credits in any market. The administration says that is consistent with the law's goal of making coverage available to all Americans.

But challengers claim the interpretation is contradicted by the wording of the law. They say the withholding of the tax credits was meant to spur states to create their own exchanges, and should not be available where states opted not to act.

Lyle Denniston, writing at SCOTUSBlog, offers additional background:

Since the [ACA] health care exchanges have been in operation, nearly five million individuals have received federal subsidies to help them afford health insurance on an exchange run by the federal government. The average subsidy had been about $4,700 per person. The fate of those subsidies apparently will now depend upon how the Court interprets four words in the Affordable Care Act. In setting up the subsidy scheme, Congress said it would apply to exchanges "established by the State."

The challengers to subsidies for those who shop for insurance on a federal exchanges have argued that those words limit the availability to the tax benefits solely to state-run exchanges. That argument failed in the U.S. Court of Appeals for the Fourth Circuit, in the ruling now under review. It was accepted in the U.S. Court of Appeals for the District of Columbia Circuit, but that ruling has now been set aside while the full D.C. Circuit reconsiders the issue.

Thus, as of now, there is no split in the federal appeals courts on the challengers' argument and thus on the scope of the ACA language regarding subsidies. The lack of such a split, however, did not prevent the Court from going ahead to grant review of the King case, as the challengers had asked it to do. They had argued, among other points, that the longer the subsidies continue to consumers who had gone to federal exchanges, the harder it would be to undo the program if the Court were to accept the challengers' interpretation.

It would have taken the votes of four Justices to grant review. The Court, as usual, did not indicate the way the Justices had voted on that question. It will take a majority, of course, to decide the case in the end. A ruling is not expected to emerge until near the end of the current Term, in late June or early July.