King v. Burwell
Issues(s): The Affordable Care Act (Obamacare), Federalism, Separation of Powers
Background:
- In 2010, to help increase health care insurance coverage, Congress passed the Patient Protection and Affordable Care Act (“ACA”). Facilitating insurance-plan purchases, § 1311 of the ACA requires each state to establish a health insurance market place, called an Exchange, no later than January 1, 2014. If a state “elects” not to create an Exchange, or creates an Exchange that does not satisfy federal requirements, then § 1321 of the ACA requires the Secretary of Health and Human Services to “establish and operate such Exchange within the state.” By the ACA’s deadline, sixteen states and the District of Columbia had created a state-run exchange, leaving the other thirty-four states with federally-run exchanges.
- In addition to the creation of Exchanges, the ACA grants prospective lower-income purchasers a tax credit that reduces the cost of insurance plans on the Exchange. The value of that tax credit is calculated by adding the insurance assistance for a taxable year that a participant would receive for each “coverage month.” Critically, the ACA (in § 36B of the Internal Revenue Code) defines “coverage month” as each month that a purchaser would have insurance that he or she obtained “through an Exchange established by the State.” The Internal Revenue Service (“IRS”) promulgated regulations that, in part, grant these tax credits to qualifying citizens regardless of whether they obtained the insurance through a federally or state-run Exchange.
- Petitioners David King, Douglas Hurst, Brenda Levy, and Rose Luck (collectively, “Petitioners” or “King”) are residents of Virginia, which has a federally-run Exchange, “who do not want to purchase comprehensive health insurance.” Under the ACA, citizens are generally required to purchase an insurance plan or pay a tax penalty—commonly known as the “individual mandate.” However, the ACA exempts from the tax penalty citizens who cannot purchase the cheapest insurance plan without exceeding eight percent of their expected annual household income. In this case, without the tax credits, the lowest insurance plan available to the Petitioners would exceed eight percent of their expected annual household income, exempting them from the tax penalty. However, when the IRS adds the tax credits to the Petitioners’ plans, the Petitioners’ insurance costs no longer exceed eight percent of their household income. This causes the Petitioners’ exemption status to dissipate, subjecting them to the tax penalty. Respondents, including Sylvia Burwell, are government officials being sued in their official capacity, or government departments and agencies (“the government”).
- Facing the prospect of paying the tax penalty, the Petitioners brought a suit alleging that the IRS’s regulation that granted tax credits to citizens in federally-run exchanges exceeded the agency’s statutory authority, was “arbitrary and capricious”, violated the Administrative Procedure Act (“APA”) and was, thus, void. The district court granted the government’s motion to dismiss the Petitioners’ claims. The Petitioners appealed to the Fourth Circuit Court of Appeals, which affirmed the dismissal. The Petitioners, subsequently, petitioned the Supreme Court for a writ of certiorari, which the Court granted on November 7, 2014.
- In a 6-3 majority, the Court held that Congress did not delegate the authority to determine whether the tax credits are available through both state-created and federally created exchanges to the Internal Revenue Service, but the language of the statute clearly indicates that Congress intended the tax credits to be available through both types of exchanges. When the plain language of the section in question is considered in the context of the statute as a whole, it is evident that the federally-created exchanges are not meaningfully different from those the states created, and therefore federally-created exchanges are not excluded from the language referring to exchanges created by the states. This reading is also in line with the Congressional intent of covering as many qualified individuals as possible, as the alternative would mean that federally-created exchanges do not contain qualified individuals and operate entirely differently from the state-created ones.
576 U.S. 473
King v. Burwell. (2015, March 4). Retrieved July 14, 2015, from Cornell University Law School.
King v. Burwell. (2015, March 4). Retrieved July 14, 2015, from http://www.oyez.org/cases/2010-2019/2014/2014_14_114
King v. Burwell. (2015, March 4). Retrieved July 14, 2015, from Cornell University Law School.
King v. Burwell. (2015, March 4). Retrieved July 14, 2015, from http://www.oyez.org/cases/2010-2019/2014/2014_14_114