According to the Washington Post, the Supreme Court announced last Friday, November 7, that it will hear the most serious challenge to the Affordable Care Act since the justices found it constitutional more than two years ago: a lawsuit targeting the federal subsidies that help millions of Americans buy health insurance.
The U.S. Supreme Court Nov. 7 granted review of a case challenging tax subsidies that are a linchpin of President Barack Obama’s health-care overhaul (King v. Burwell, U.S., No. 14-114, review granted 11/7/14). The case is likely to determine whether individuals who buy health insurance on an exchange established by the federal government in the 36 states that don’t operate their own ACA marketplaces will receive assistance in the form of federal tax credits. The availability of such credits also affects the employer mandate, since the penalty aspect of the mandate is connected to employees obtaining subsidized coverage through a marketplace.
The petitioners are four individuals—David King, Douglas Hurst, Brenda Levy and Rose Luck—who object to having to obtain individual health care coverage on the federal exchange. Without subsidies, the individuals would fit within the law’s hardship exemption and not have to purchase insurance.
The potential implications of the decision for the future of the coverage provisions of the ACA could be huge.
Currently, 7.3 million Americans have purchased private insurance through ACA marketplaces, of which approximately 5 million have done so through the 34 federally run marketplaces.
Of these individuals, more than 4 million have received subsidies because they earned 400 percent of the federal poverty level or less, and were not eligible for Medicaid in their states.
The loss of these subsidies would make insurance unaffordable for many, if not all, of these newly insured individuals. This would undermine the ACA’s current and future success in reducing the number of uninsured Americans, which dropped by an estimated 8 to 10 million during the first open enrollment period.
Other effects of a Supreme Court ruling in favor of the plaintiffs would be to render the individual and employer mandates meaningless in affected states. The individual mandate ceases to apply when Americans cannot find affordable insurance, defined as plans with premiums that cost less than 8 percent of income.
Without subsidies, most low- and lower-middle-income Americans would no longer be able to find affordable insurance. And the penalties that employers face for not offering affordable insurance to their employees apply only when their uninsured employees go to marketplaces and receive federal subsidies, which would no longer exist.
The decision to hear the case, which will be decided by the end of the court’s term in June, comes as the act’s second enrollment period begins Nov. 15.
