Short Analysis
May 2015

How King v. Burwell Could Affect Health Insurance Under Obamacare

Learn what King v. Burwell, the Supreme Court case that threatens the provision of health care subsidies (premium tax credits), is all about. The Court will announce its decision in mid- to late-June. To hear from people whose access to health care is at risk, view shareable graphics, and more, visit our King v. Burwell resources page.

What is King v. Burwell about?

The case challenges the federal government's provision of tax credits (also known as "subsidies") to help low- and middle-income people afford their health insurance premiums in states that didn't set up their own health insurance marketplace (exchange). Consequently, it threatens the health coverage of millions of people who rely on premium tax credits.

The plaintiffs claim that the ACA allows residents to receive premium tax credits only in states that run their own health insurance marketplaces directly, rather than the federally facilitated marketplaces operated by many states. The plaintiffs base their argument on a clause in the ACA that says that tax credits will be available in marketplaces “established by the state.”

They assert that Congress never meant to extend premium tax credits to consumers in states that didn’t set up their own marketplaces directly. They argue that Congress intended to induce states to run their marketplaces by withholding premium tax credits from residents of states that opted not to do so.

King v. Burwell and the ACA: What’s at stake?

To put it simply, if proponents of this case prevail, the government will strip premium tax credits from residents in all of the states with federally facilitated marketplaces. Those tax credits help low- and moderate-income residents afford to pay their monthly health insurance premiums. Without this benefit, millions of residents would not be able to pay for their health insurance.

The scale of the problem is large. In the second open enrollment period, around 7.5 million people in the federally facilitated states received premium tax credits in 2015. All of these individuals would lose their tax credits, and most of them would not be able to afford health insurance. Millions more people would not be able to apply for these tax credits in the future.

Further, premium tax credits increase and fortify the pool of enrollees that help to create a stronger and more robust health insurance market. In doing so, they help keep down health insurance premiums. A ruling in favor of the plaintiffs would throw the health insurance system into chaos. Premiums would spike by an estimated 35 percent. This is why doctors, insurers, and hospitals all weighed in to support the government's position. Read more about why premium tax credits are essential to the Affordable Care Act.

What is the federal government’s response to King v. Burwell?

The government’s position is that a reading of the entire statute and its legislative history demonstrates that these tax credits were intended to be available in all states—that the ACA’s intent was to extend health coverage to the uninsured regardless of where they live. If premium tax credits were unavailable in some states, this intention could not be fulfilled, and insurance would be unaffordable. For an overview of the legal case supporting the government, read this Health Affairs article by Families USA Executive Director Ron Pollack. 

When a state decides not to set up a marketplace directly, the ACA requires that operation of the marketplace must be automatically delegated to the federal government. In so doing, the federal government acts on behalf of the state. It would be make no sense for the federal government to undertake this responsibility if all the moderate- and low-income residents could not afford health insurance.

Further, all five former committee chairs who wrote the legislation stated, in “friend-of-the-court” briefs, that Congress never had any intention of withholding premium tax credits from states with federally facilitated marketplaces. Moreover, since no state was informed that a decision about running a marketplace directly would affect the availability of these tax credits, there clearly was no inducement to do so.

Families USA filed a friend-of-the-court brief in the King case.