June 25, 2015 -- Millions of people who received tax credits to pay for health insurance will get to keep them.
The Supreme Court ruled Thursday that the tax credits, offered on Affordable Care Act insurance policies sold through Healthcare.gov, are legal.
The Court’s decision protects health insurance coverage for nearly 6.4 million Americans with low-to-moderate income in 34 states who are relying on tax credits to afford health insurance.
A decision saying the tax credits were illegal could have sent insurance markets into “sheer chaos,” says Linda Blumberg, senior fellow with the Urban Institute.
The case, King vs. Burwell, centered on one clause in the Affordable Care Act (also known as "Obamacare"), the health insurance law that set up the Marketplaces. The language says tax credits are available to people who enroll in health insurance “through an Exchange established by the state.” The law’s challengers said this meant that people from states that did not set up their own Marketplaces weren’t eligible for the credits.
The Supreme Court disagreed by a ruling of 6-3.
"The combination of no tax credits and an ineffective coverage requirement could well push a State's individual insurance market into a death spiral," Chief Justice John Roberts wrote in the majority opinion. "It is implausible that Congress meant the Act to operate in this manner."
"Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them," Roberts wrote.
This ruling allows the Affordable Care Act to continue without interruption.
“It’s all systems go,” says John Desser, vice president of government affairs for online insurance broker eHealth.
Just after the ruling was issued, supporters outside the Supreme Court building began chanting: "ACA is here to stay."
"Health care is not a privilege for a few, but a right for all," President Barack Obama said after the ruling was issued.
The law, he said, is working as it's supposed to -- and in many ways, better than expected to.
"We've got more work to do, but what we're not going to do is unravel what is now woven into the fabric of America," he said.
"The polling is pretty clear that while there are things about this law that people aren't happy with, they didn't want these markets destroyed," Blumberg said after the ruling. "People who are getting the financial assistance so they can afford coverage are glad to be getting it."
Not everyone agreed with the Court's decision, though.
"Who is going to pay for these subsidies? All of us," says Bob Coslett, 80, from Rockville, MD, who was among those gathered outside the Court on Thursday. "I'm afraid the costs of health care are going to go up for my children and grandchildren because of this decision."
The fight is not over, Republican presidential candidate Jeb Bush tells CNN. If elected president, he says, fixing the health care system would be one of his first priorities, and he pledged to repeal and replace the law.
"Affordable Care Act implementation returns to normal following today's ruling, but debate over the law is likely far from over," says Elizabeth Carpenter, director at Avalere Health, a health care consulting company. Congress is still likely to consider repealing certain taxes the health care industry and employers must pay to help support the law. She also anticipates efforts to alter the requirement that employers with more than 50 workers offer health care benefits.
Diana Furchtgott-Roth, senior fellow at the Manhattan Institute for Policy Research, a conservative think tank, calls the decision "troubling."
"Laws change all the time," she says. "In 2017, there can be another Congress and another president. Depending on the composition of those individuals, there would be an opportunity to make some reforms in the Affordable Care Act. There are certainly many, many egregious aspects of the law that need to be reformed."
Justice Antonin Scalia wrote in a scathing dissenting opinion: "Words no longer have meaning if an Exchange that is not established by a State is 'established by the State' ... We should start calling this law SCOTUSCare."
Keeping Insurance Markets Stable
Experts worried that a decision in favor of the law’s challengers would have wreaked havoc in insurance markets as millions of people lost financial assistance. According to data from the Department of Health and Human Services, 87% of people who purchased a plan through Healthcare.gov in 2015 received financial assistance. Without the subsidies, experts say the majority of people couldn’t afford their insurance and would be forced to drop their current policies.
“If one of the main barriers to getting insurance coverage was affordability, then I suspect anybody getting a subsidy that isn’t in the middle of treatment might be forced to drop,” Dresser says.
The average tax credit is $263-$272 per month in states without their own Exchange, reducing premiums by more than 70%, according to an analysis by Kaiser Family Foundation. Without tax credits, individuals would pay an average of 287% more for a plan purchased through Healthcare.gov.
As people drop coverage, insurance pools over time would disproportionately include sick people. That, in turn, would drive premiums higher for everyone.
“Once you start pulling this big bulk of predominantly healthy, low-income people out of the insurance pool, it affects the risk pool in the non-group marketplace as a whole,” Blumberg says.
A decision favoring the law’s challengers would have also caused prices to rise by weakening the law’s individual mandate, or the requirement to have health insurance. Without tax credits, millions of Americans would have become exempt because they'd no longer be able to afford insurance.
This is the second major Supreme Court challenge the Affordable Care Act has faced. And experts say that while this one posed the biggest threat, it’s not the last lawsuit "Obamacare" will see.