“The Patient Protection and Affordable Care Act grew out of a long history of failed health insurance reform. In the 1990s, several States sought to expand access to coverage by imposing a pair of insurance market regulations–a “guaranteed issue” requirement, which bars insurers from denying coverage to any person because of his health, and a “community rating” requirement, which bars insurers from charging a person higher premiums for the same reason. The reforms achieved the goal of expanding access to coverage, but they also encouraged people to wait until they got sick to buy insurance. The result was an economic “death spiral”: premiums rose, the number of people buying insurance declined, and insurers left the market entirely. In 2006, however, Massachusetts discovered a way to make the guaranteed issue and community rating requirements work–by requiring individuals to buy insurance and by providing tax credits to certain individuals to make insurance more affordable. The combination of these three reforms–insurance market regulations, a coverage mandate, and tax credits–enabled Massachusetts to drastically reduce its uninsured rate.The Affordable Care Act adopts a version of the three key reforms that made the Massachusetts system successful. First, the Act adopts the guaranteed issue and community rating requirements. 42 U. S. C. §§300gg, 300gg-1. Second, the Act generally requires individuals to maintain health insurance coverage or make a payment to the IRS, unless the cost of buying insurance would exceed eight percent of that individual’s income. 26 U. S. C. §5000A. And third, the Act seeks to make insurance more affordable by giving refundable tax credits to individuals with household incomes between 100 percent and 400 percent of the federal poverty line. §36B.
In addition to those three reforms, the Act requires the creation of an “Exchange” in each State–basically, a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own Exchange, but provides that the Federal Government will establish “such Exchange” if the State does not. 42 U. S. C. §§18031, 18041. Relatedly, the Act provides that tax credits “shall be allowed” for any “applicable taxpayer,” 26 U. S. C. §36B(a), but only if the taxpayer has enrolled in an insurance plan through “an Exchange established by the State under [42 U. S. C. §18031],” §§36B(b)-(c). An IRS regulation interprets that language as making tax credits available on “an Exchange,” 26 CFR §1.36B-2, “regardless of whether the Exchange is established and operated by a State . . . or by HHS,” 45 CFR §155.20.
Petitioners are four individuals who live in Virginia, which has a Federal Exchange. They do not wish to purchase health insurance. In their view, Virginia’s Exchange does not qualify as “an Exchange established by the State under [42 U. S. C. §18031],” so they should not receive any tax credits. That would make the cost of buying insurance more than eight percent of petitioners’ income, exempting them from the Act’s coverage requirement. As a result of the IRS Rule, however, petitioners would receive tax credits. That would make the cost of buying insurance less than eight percent of their income, which would subject them to the Act’s coverage requirement.
Petitioners challenged the IRS Rule in Federal District Court. The District Court dismissed the suit, holding that the Act unambiguously made tax credits available to individuals enrolled through a Federal Exchange. The Court of Appeals for the Fourth Circuit affirmed. The Fourth Circuit viewed the Act as ambiguous, and deferred to the IRS’s interpretation under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837.
Held: Section 36B’s tax credits are available to individuals in States that have a Federal Exchange. Pp. 7-21.”
See also: New York Times – Justices Back Key Element of Health Law 6-3 Vote on Federal Subsidies Is a Big Victory for Obama – “Affirming a key element of President Obama’s signature legislative achievement, the Supreme Court ruled that the health care law may provide nationwide tax subsidies to help poor and middle-class people buy insurance,” and WSJ.com – After King v. Burwell Ruling, Health Law Issues Involve Implementation