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SUMMARY: The U.S. Supreme Court on June 25 issued its opinion turning back the most recent—and most likely final—attack on the Affordable Care Act. The decision had six justices in favor—Chief Justice Roberts, who wrote the opinion, was joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan. The three dissenting justices were Scalia, Thomas, and Alito. The opinion is available at http://www.supremecourt.gov/opinions/14pdf/14-114_qol1.pdf.

DETAILS: The Chief Justice’s 21-page opinion began by laying out the background for the case and observed that the ACA arose out of a long history of failed health insurance reform. In the 1990’s, he noted, states tried to expand access to coverage by changing the regulation of health insurance: requiring “guaranteed issue”, which prohibited carriers from denying coverage due to an insured’s health, and “community rating”, which, he wrote, bars insurers from charging more for the same reason. This had the effect of creating what Roberts called an “economic death spiral”: premiums rose and the number of people buying insurance declined.

Massachusetts, in 2006, remedied this, per the history recited by the Chief Justice, by adding a requirement that all people buy health insurance and providing tax credits for those who couldn’t afford the premiums. This enabled Massachusetts to drastically reduce its uninsured rate, he reported.

The ACA included these three reforms, including a fine for failing to purchase insurance, unless the premiums were more than 8% of income. The law also mandated “exchanges”, or public marketplaces, in every state for individuals to purchase insurance. In those states unwilling to set them up, the Federal government was authorized to establish exchanges. The law also provided that lower-income individuals could get a subsidy in the form of a tax credit or premium reduction, if they purchased insurance from a state-based exchange. The administration, however, went further and also offered subsidies to people who purchased their insurance from Federally established exchanges.

Four individuals in Virginia, which did not set up its own exchange, did not want to purchase insurance. It would have cost more than 8% of their income if they were not subsidized, but less than 8% if they were. They brought suit, saying that it was illegal for the Federal exchange to give them a subsidy (which would put them in the position of being required to purchase insurance), because, they maintained, subsidies could only be offered to those purchasing from state-based exchanges.

Lower courts threw out the case for varying reasons and the Supreme Court heard arguments on the case. In the final analysis, the court found the ACA’s language was indeed ambiguous; but in that situation, the court must seek to find a meaning for the phrase that would produce “a substantive effect that is compatible with the rest of the law.” Taking a step back, the court found that using the interpretation recommended by the Virginians, would result in the very “death spiral” that it was designed to avoid. On the other hand, interpreting the language the way the administration had done, would enable the law to work as intended.

While acknowledging that the Virginians “plain-meaning” arguments were strong, the Chief Justice stated that the ACA’s “context and structure compel[led]” the conclusion that subsidies were available in both state-created and federally-created exchanges. With that, the Supreme Court’s majority has fended off the second major attack on the ACA.

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