Supreme Court Upholds ACA Subsidies

Published: July 1, 2015


Last Thursday, the U.S. Supreme Court ruled 6-3 that the federal subsidies to individuals in states with federally-run health insurance exchanges are allowable. With the threat to many individuals’ health care coverage now in the rearview mirror, hospitals and states can confidently shift focus and invest in improving health care delivery to meet current and future patient and community needs.

The plaintiffs who brought the challenge were seeking to dismantle the economic structure set up by the Affordable Care Act (ACA) by focusing on specific words in the Act which suggested that federal subsidies for individuals would only be available in cases where the state had established the exchange. After passage of the ACA, many states refused to establish exchanges, and citizens in those states purchased their health insurance through the federally-run marketplace. A ruling for the plaintiffs would have jeopardized health coverage for approximately 6 million people in the over 30 states that had not established their own insurance exchanges.

Chief Justice John Roberts, a George W. Bush-appointee, authored the opinion in this second major challenge to the Affordable Care Act to reach the high court.  Writing for the majority, Chief Justice Roberts focused on the Congressional intent that all individuals qualify for a subsidy under the Act, not only those individuals in states with state-run exchanges. Roberts stressed that the court, “must respect the role of the legislature, and take care not to undo what it has done. A fair reading of legislation demands a fair understanding of the legislative plan. Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

The Future of the Affordable Care Act

Hospital leaders welcomed the stability offered by the decision.  The 6-3 majority in King v. Burwell signals to would-be legal challengers to the ACA that the high court will not be a vehicle for dismantling or picking apart the law.  This 2015 decision follows the Supreme Court’s 5-4 decision in 2012 to uphold the constitutionality of the ACA’s “individual mandate” for individuals to have health insurance.  The King v. Burwell decision confirms that opponents of the ACA seeking repeal or modification should be focusing on the political process at the legislative level, instead of relying on the courts to invalidate the reform structures established by the ACA.  Any big changes to the ACA are now unlikely unless and until there is a Republican presidency, although we may see a third court challenge when the “Cadillac plan tax” on high-cost employer health plans goes into effect in a few years.

What’s Next for the States?

The King v. Burwell decision leaves states with minimal incentive to create their own health insurance exchanges. With this confirmation, states need not establish their own marketplaces in order for their citizens to receive federal subsidies, many states will likely continue to have their residents use the federally-run exchange.  The ruling may even result in states with exchanges choosing to discontinue their exchanges in favor of the federal marketplace. Another option for states that prefer more control over the local market but lack the technical expertise to operate an exchange, is a “federally supported state exchange,” whereby the state performs the marketplace functions, but rents the IT platform from healthcare.gov.

Some states may also re-examine their decisions on Medicaid expansion. Productive policy discussions amongst state leaders are will be focused on maintaining affordability for consumers and flexibility for the states.  With the stability offered by King v. Burwell insurers and states should be more likely to make needed investments in extending coverage and increasing meaningful access to care for the newly enrolled.

Health Benefits for Same-Sex Couples

In addition to the stability in health insurance coverage provided to individuals in Thursday’s King v. Burwell decision, the Supreme Court’s landmark decision on Friday granting the right to marry to all same-sex couples will also affect the health insurance market. With the legalization of same-sex marriage in every state, employees may add their same-sex spouses to their benefit plans in all 50 states. At the same time, with the obligation to honor same-sex marriages nationwide, large employers may decide to discontinue their domestic partner benefits and require marriage for all employees in order to add partners to benefit plans.

Limitations of the Ruling

While hospital leaders welcomed the stability offered by the decision, its immediate effect may simply be status quo for health care providers. The decision safeguards the existing subsidies to lower income purchasers of health insurance, but the quality of the insurance plans held by many individuals may still be low, with high deductibles. Under the ACA, the responsibility for improving care delivery and cost-effectiveness still rests with health care providers, who will continue to see reimbursement shifts from volume to value. Perioperative nurses and surgical department leaders must continue to find ways to improve surgical outcomes and increase patient satisfaction in order to lead their facilities to success under the reform structures established by the ACA. The American Nurses Association sees a continuing need for nurse-led improvements and nationwide investments in the profession and health care delivery improvements.