Are ObamaCare’s Insurance Subsidies Legal?

By Kathryn Hickok

Last Wednesday the U.S. Supreme Court heard oral arguments in a case challenging the implementation of the Affordable Care Act (ACA). Plaintiffs in King v. Burwell claim the Internal Revenue Service (IRS) does not have the authority to circumvent the actual text of the ACA. According to the law, federal insurance premium subsidies can be allotted only if plans are purchased “through an Exchange established by the State.” When 36 states chose not to create their own exchanges, the IRS essentially rewrote this portion of the law to give subsidies anyway.

Oregon did set up a state exchange―Cover Oregon. But Cover Oregon never worked as planned; and now Oregon is contracting with the federal exchange, HealthCare.gov. The federal government and Oregon state officials claim this will guarantee Oregonians continued access to federal subsidies, but the King decision may not allow such subsidies to continue.

The King v. Burwell case could have a major impact on the future of ObamaCare. If the Court strikes down the IRS rule, the government would withhold subsidies for those living in states that chose to protect their citizens from the law’s employer mandate, the individual mandate, and the high costs of operating their own state-based exchanges. The Court’s decision could provide an important opportunity for states to reform health care in a meaningful way that respects taxpayers, provides for the truly needy, and addresses health care costs.

A ruling is expected by June 30.

Kathryn Hickok is Publications Director at Cascade Policy Institute, Oregon’s free market think tank.