King v. Burwell: How It Impacts Consumers

The legal challenge to the Affordable Care Act (ACA), King v. Burwell, which focused on whether health insurance subsidies are available to residents of all states, is over.

The ACA established health insurance exchanges allowing low and middle-income individuals to purchase health coverage at a reduced cost due to federal tax credits. The IRS confirmed the tax credit would be granted to all eligible Americans, regardless of whether they purchased their health insurance from a state exchange or the federal exchange, www.healthcare.gov.

The plaintiffs in King v. Burwell argued that language in the ACA limited tax credits only to those purchasing coverage through state exchanges. They said the ACA’s wording implied anyone living in the 34 states using the federal exchange should lose their premium subsidy.

Of the more than 10 million Americans with ACA coverage at the end of March 2015, 85 percent (or more than 8.7 million consumers) were receiving an advanced premium tax credit to help make their health care premium more affordable. If the nation’s highest court had ruled against the U.S. Department of Health & Human Services in King v. Burwell, subsidies would have been cut-off for more than 7.5 million residents of states without their own health insurance exchanges. That would likely have led to millions of individuals losing their health insurance due to a lack of affordability, which the ACA was designed to provide.

On June 25, 2015, the U.S. Supreme Court ruled in a 6-3 vote that federal tax credits are available to all qualifying residents, regardless of whether they live in a state with a state-established health insurance exchange or one that uses the federal exchange.

Now that the decision has been made, millions of Americas can rest a bit easier, but the debate over the ACA will likely continue in political arenas. States may question their need to be involved in their own health insurance marketplace if a federally run exchange can provide coverage.