Understand how we got here — and how to move forward.


June 25, 2015

Supreme Court upholds ACA subsidies

Daily Briefing

    The Supreme Court on Thursday in a 6-3 decision upheld the Affordable Care Act's subsidies designed to help U.S. residents purchase coverage through the federal exchange.

    The subsidies were being challenged in the case King v. Burwell. At issue in the case was that while the Affordable Care Act (ACA) says subsidies are available to help certain U.S. residents purchase coverage offered "through an exchange established by the State," a May 2012 IRS rule allows the subsidies to be used in an exchange administered either by a state or the federal government.

    A ruling striking down the subsidies could have eliminated about $28.8 billion in subsidies to 9.3 million individuals in 34 states in 2016, according to an Urban Institute analysis.

    "The ruling is a clear win for the coverage expansion goals of the ACA, and providers can expect the government to continue full speed ahead with the delivery system reform provisions of the law as well," says Chas Roades, the Advisory Board Company's Chief Research Officer.

    "Overall, this ruling will have minimal impact on providers, who should maintain current course and speed with all strategies related to the implementation of the ACA," Roades adds.

    What the Supreme Court ruling means for hospitals

    Details of Ruling

    The Supreme Court upheld the decision by the 4th Circuit Court of Appeals. In that ruling, the appeals court wrote that "the applicable statutory language is ambiguous and subject to multiple interpretations" and therefore the government and its regulators had legal precedent to determine how to implement the law.

    The high court's opinion, delivered by Chief Justice John Roberts and joined by Justices Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, Anthony Kennedy, and Sonia Sotomayor, stated, "Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them."

    The opinion acknowledged the plaintiffs' contention that the language in the law is ambiguous. However, it stated that striking down the subsidies "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."

    It added, "The combination of no tax credits and an ineffective coverage requirement could well push a State's individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation, but those requirements only work when combined with the coverage requirement and tax credits. It thus stands to reason that Congress meant for those provisions to apply in every State as well."

    Justice Antonin Scalia wrote the dissenting opinion, which was joined by Justices Samuel Alito and Clarence Thomas (Koff, Northeast Ohio Media Group/Cleveland Plain Dealer, 6/25; Kendall/Radnofsky, Wall Street Journal, 6/25; Leonard, U.S. News & World Report, 6/25; Supreme Court ruling, 6/25).

    Have King v. Burwell questions? We've got answers

    Want to understand the impact of the Court's decision? Join the Advisory Board's popular "Pulse Check" panelists as they break down the Supreme Court's decision on the Affordable Care Act, the latest data on ACOs and bundled payments, and the industry's continued shift toward value-based care.


    Have a Question?


    Ask our experts a question on any topic in health care by visiting our member portal, AskAdvisory.