By Professor Erwin Chemerinsky*
If not for the deep ideological divisions surrounding the Affordable Care Act, there would be no doubt that those who purchase insurance on exchanges created by the federal government should receive tax credits. In King v. Burwell, Chief Justice Roberts and Justice Kennedy transcended the partisanship surrounding the law and joined Justices Ginsburg, Breyer, Sotomayor and Kagan in following Congress’s clear intent: those who qualify economically may receive tax credits when they purchase insurance from exchanges, whether those exchanges are created by the federal or state governments.
Prior to the Affordable Care Act, approximately 50 million Americans were without health care coverage. The goal of the law was to make sure that almost all Americans had some form of health insurance. For the poorest among us, the Act required that states receiving Medicaid funds provide coverage to those within 133% of the federal poverty level.
For those above the poverty level but without adequate resources to buy insurance, the Act creates tax credits. To facilitate the purchase of health insurance, the Affordable Care Act establishes health care “exchanges,” where individuals can purchase competitively priced coverage.
The Act provides that “[e]ach State shall … establish an American Health Benefit Exchange.” Congress, though, cannot constitutionally compel states to enact laws. So the Act also provides that if a state does not “elect” to create an exchange, the federal government “shall establish and operate such exchange within the State.”
To make health insurance affordable, the Act provides a federal tax credit to low- and moderate-income Americans to offset the cost of insurance policies. The act provides the credit to individuals who enroll in a health plan “through an Exchange established by the State.”
The problem, though, is that only 16 states have established exchanges. In the other 34 states, the exchanges are created by the federal government pursuant to the Act. The IRS promulgated regulations making the tax credit available to qualifying individuals who purchase health insurance on both state-run and federally facilitated exchanges. The IRS rule says that credits shall be available to anyone “enrolled in one or more qualified health plans through an Exchange.”
There is no doubt that Congress intended that those who qualify economically should receive tax credits, whether the insurance is purchased from a state or a federally created exchange. The law specifically says that the federal government is to create “such exchange” if the state does not. Most important, the Court stressed that Congress’s clear purpose was to make tax credits available to those who otherwise could not afford health insurance
In fact, denying such tax credits would almost surely collapse the health care exchanges created by the federal government and maybe all of them in the country. If individuals could not get tax credits and purchase insurance, the risk pools of the exchanges would be significantly altered. A Rand Study has estimated that costs of health insurance in the federally-created exchanges could increase by as much as 47 percent if these individuals no longer could participate because of the lack of tax credits. Many then would be priced out of being able to afford health insurance on the exchanges, which would further limit the risk pools and create a spiral that would collapse these health insurance exchanges.
The Court rightly said that Congress surely could not have intended to give states the ability to collapse the Affordable Care Act by refusing to create health care exchanges. Chief Justice Roberts concluded his majority opinion by declaring: “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.” That is exactly what the Court did in upholding tax credits for all who purchase insurance.
It is easy to focus on this case as purely a question of law as to how a federal statute should be interpreted. But that would ignore the crucial human dimension of this case: millions of people will continue to have access to health care because of this decision. Lives will be saved and suffering will be lessened. This is exactly what Congress intended.
*Dean and Distinguished Professor of Law, Raymond Pryke Professor of First Amendment Law, University of California, Irvine School of Law