Academic journal article ASBBS E - Journal

Is the Affordable Care Act Here to Stay? the Supreme Court Will Decide

Academic journal article ASBBS E - Journal

Is the Affordable Care Act Here to Stay? the Supreme Court Will Decide

Article excerpt


The recent economic climate coupled with the significant level of unemployment has increased the focus on the inability to pay for rising expenses. One of the more common living expenses that is of utmost concern is health insurance. With the rising cost of health insurance during the past years, Congress enacted the Patient Protection and Affordable Care Act (the "ACA") in 2010 with the goal of increasing the number of Americans covered by health insurance and decreasing the cost of health care. Certain tools are available to facilitate the purchase of insurance. More specifically, the law provides for the establishment of "Exchanges" through which individuals can purchase health insurance on a competitive basis.

On March 23, 2012, the Internal Revenue Service issued a final rule implementing the premium tax credit provision of the ACA. In its final rule, the IRS interpreted the ACA as authorizing the agency to grant tax credits to certain individuals who purchase insurance on either a state-run health insurance "Exchange" or a federally-facilitated "Exchange." An Exchange is a means of organizing the insurance marketplace to help individuals shop for insurance coverage and compare the insurance marketplace.

During the last few years, different group of employers and individuals commenced four different lawsuits around the country contesting the authority of a "Federally-Facilitated Exchange" under Section 1321 of the Affordable Care Act to receive a related subsidy. Two of the cases, Halbig v Sebelius, 758 F.3d 412, and King v. Burwell, 759 F.3d 358, have been decided by their respective Circuit Courts of Appeals. The remaining two cases, Indiana v IRS and Pruitt v Burwell remain at the District Court level.

Today's news is full of announcements regarding the Supreme Court's recent decision to review a decision of the Fourth Circuit upholding an IRS rule extending tax credits to federally established exchanges. Two years ago, the Supreme Court decided on the constitutionality of the landmark legislation that is formally known as the Patient Protection and Affordable Care Act more commonly known as Obamacare. Last year, the Supreme Court decided the hobby lobby case. The saga continues. Recently, the Supreme Court granted certiorari to review the tax subsidy provision of the Affordable Care Act. Although little attention had been paid to the tax subsidy, the implications of the conflicting federal decisions can be far reaching. This paper will discuss an analysis of the conflicting Circuit Courts' decisions as well as the decision of the Supreme Court to grant certiorari. Before the specific cases are discussed, a few key statutory sections are worth noting.


Section 1311 of the ACA requires that "each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange (referred to in this title as an 'Exchange')." ACA § 1311(b) (1), codified at 42 U.S.C. § 18031(b) (1).

Section 1321 of the ACA directs HHS to step in and establish "such Exchange" in that state if a state decides not to establish its own Exchange, or fails to establish an Exchange consistent with federal standards. Only sixteen states and the District of Columbia have elected to set up their own Exchanges and thirty-four states rely on federally-facilitated Exchanges. The ACA authorizes tax credits for many low and middle-income individuals who purchase health insurance through the Exchanges. The Exchanges administer a program to provide advance payments of tax credits for eligible individuals; where an advance payment is approved, the Exchange arranges for the payment to be made directly to the individual's insurer, lowering the net cost of insurance to the individual.

Section 1401 of the ACA sets forth how this tax credit is determined. Section 1401, codified at 26 U.S.C. § 36B - calculates this credit based in part on the premium expenses for the health plan "enrolled in [by the individual] through an Exchange established by the State. …

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