The Supreme Court ruled Thursday that the tax credits, offered on Affordable Care Act insurance policies sold through Healthcare.gov, are legal.
The Court’s decision protects health insurance coverage for nearly 6.4 million Americans with low-to-moderate income in 34 states who are relying on tax credits to afford health insurance.
A decision saying the tax credits were illegal could have sent insurance markets into “sheer chaos,” says Linda Blumberg, senior fellow with the Urban Institute.
The case, King vs. Burwell, centered on one clause in the Affordable Care Act (also known as “Obamacare”), the health insurance law that set up the Marketplaces. The language says tax credits are available to people who enroll in health insurance “through an Exchange established by the state.” The law’s challengers said this meant that people from states that did not set up their own marketplaces weren’t eligible for the credits.
The Supreme Court disagreed by a ruling of 6-3.
The challengers’ “arguments are strong, but the Act’s context and structure compel the conclusion (the language) allows tax credits for any insurance purchased on any Exchange created by the act,” the opinion says. “Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.”
This ruling allows the Affordable Care Act to continue without interruption.
“It’s all systems go,” says John Desser, vice president of government affairs for online insurance broker eHealth.