The Supreme Court said it would review a centerpiece of the Affordable Care Act, agreeing to decide whether the Obama administration is improperly providing tax credits to consumers who purchase insurance through federal exchanges serving more than 30 states.
The case granted Friday marks the law’s third trip to the high court and sets the stage for another major health-care ruling next summer.
The appeal threatens a principal aim of President Barack Obama ’s signature law—extending private health insurance to lower-income Americans who don’t receive coverage from their employers or qualify for Medicaid—and could cripple the law if the challengers prevail.
The court’s decision to hear the appeal, coming while the issue is still pending before another federal appeals court, also casts a cloud over the tax subsidies as the second round of open enrollment for insurance through the exchanges is set to begin in mid-November. Nonprofit groups have been pushing the tax credits to get more people to sign up.
Ron Pollack of Families USA, a group that advocates for the Affordable Care Act, said the latest case represented “the most serious existential threat” of the moment to the 2010 law.
Conservative groups contend the health law’s text permits tax credits only for people who buy insurance from state-run exchanges. Eliminating the tax subsidy, which totals billions of dollars, could further sour the public on the health-care overhaul. The law has struggled to gain acceptance amid Republican opposition, technical problems and legal challenges.
In 2012, Chief Justice John Roberts joined four more liberal justices to uphold most of the law, over a sharp dissent by four conservatives.
Earlier this year, Chief Justice Roberts joined other conservatives in a 5-4 ruling that carved out an exception to providing contraceptive coverage for employers who object on religious grounds. Friday’s order suggests the justices are eager to renew their scrutiny of the law.
In July, the Fourth U.S. Circuit Court of Appeals in Richmond, Va., upheld the subsidies for the federally run exchanges on the same day a panel of the U.S. Court of Appeals for the District of Columbia Circuit struck them down. The full D.C. Circuit decided to rehear its decision, setting aside the panel ruling, and scheduled arguments for December. Those could be canceled in light of the Supreme Court’s move.
Arguments at the high court are likely in March, with a decision before July.
“The need for a quick and final resolution of this question is undeniable,” said Sam Kazman, general counsel of the Competitive Enterprise Institute, a conservative advocacy group that is coordinating lawsuits against the tax credits. “This subsidies-for-everyone rule affects nearly every person across the country,” he said.
White House spokesman Josh Earnest said, “These lawsuits won’t stand in the way of the Affordable Care Act. We are confident that the financial help afforded millions of Americans was the intent of the law.”
The health law provides tax credits to lower-income Americans who purchase insurance “through an exchange established by the state.”
At issue is whether those same credits are available to consumers who buy insurance through the federal exchanges, which the law established as a backup if states didn’t set up their own marketplaces. The Internal Revenue Service has issued regulations authorizing the tax credits for both state and federal exchanges.
The administration and several of the law’s authors say it would be senseless to deny tax credits to Americans who have no choice but to use the federal exchanges. The challengers argue the language serves to encourage states to run their own exchanges by providing financial benefits to their residents.
The 2010 health-care overhaul was conceived as a federal-state partnership that, like Medicaid and other programs, would principally be funded through Washington but managed by states. Many Republican-controlled states and some Democratic-led ones were unwilling or unable to fully set up their own exchanges, leaving the federal government to run them.
The decision to hear the case comes eight days before the second round of enrollment begins. The HealthCare.gov website, which will serve as the main platform for people in 37 states to get coverage this year, goes live Nov. 15.
At least a dozen states are fully running their own exchanges. A number of other states are in a gray area because they have turned over at least some responsibilities to the federal government. Officials in some of those states have already indicated they are willing to take further steps to guarantee their residents access to the tax credits if necessary.
The Affordable Care Act requires most Americans to carry health insurance, regardless of their home state. The exchanges were designed to extend coverage to the uninsured—for the most part, individuals who didn’t get health care through their employer, Medicaid or Medicare—by providing a competitive marketplace for policies. Tax credits for lower-income consumers were considered essential in delivering the promise of the law’s name.