On June 25th, the U.S. Supreme Court ruled 6-3 in favor of the Obama administration in King v. Burwell. The court decided that “established by the state” in section 36B is ambiguous when read in conjunction with other provisions of the Affordable Care Act (ACA) and that Congress must have intended the phrase to include exchanges established by the federal government. The court agreed to hear the case after the D.C. Circuit Court of Appeals and Fourth Circuit reached opposite conclusions on the issue.

Chief Justice Roberts delivered the opinion of the court. The court acknowledged that the plain meaning of “established by the state” in section 36B is unambiguous and would exclude exchanges established by the federal government. However, the court reasoned that “established by the state” is ambiguous in light of the way other sections of the ACA use the term. For example, 42 U.S.C. 18032 (contained in section 1312(f) of the ACA) defines an individual qualified to purchase a qualified health plan as an individual that “resides in the state that established the exchange.” According to the petitioner’s reading, qualified health plans do not have to be made available to individuals residing in states with federal exchanges.

After concluding that “established by the state” is ambiguous, the court then interpreted the phrase in light of the structure and purpose of the ACA. The court concluded that Congress must have intended for anybody who purchases insurance through an exchange, whether operated by a state or the federal government, to receive premium tax credits. To interpret the statute otherwise would have the effect of creating a health insurance death spiral in states that did not establish exchanges, a result which Congress could not have intended. Justice Scalia authored the dissent and argued that under the plain meaning rule, section 36B only provides tax credits to individuals enrolled in state run exchanges.

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