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The Supreme Court recently announced that it will hear another challenge to Obamacare: King v. Burwell. This time, the court will decide whether the health care law should be implemented as written by Congress or implemented as interpreted by the Obama administration. The law allowed states to establish a health insurance exchange that met specific requirements. It also authorized health insurance subsidies for certain people purchasing coverage in state-established exchanges, but not in the federal exchanges. Despite the language of the law, the Obama administration interpreted it to allow subsidies to be given to people buying health insurance through federal exchanges.

What Is the History?

What Is at Stake?

The issue before the Supreme Court centers on how the law provided for the premium subsidies.

The court will assess the meaning and interplay of a few key provisions in the law, including:

• Section 1311 of the law instructs state governments to set up an exchange.
• If a state fails to create its own exchange, then section 1321 directs the federal government to establish an exchange in that state.
• Section 1401 of the law specifies that people may receive a premium subsidy if they enroll in a plan “established by the State under [section] 1311” of the law.

When the IRS wrote its regulation, it ignored the text of the law and effectively rewrote section 1401 to allow subsidies to go to insurance plans purchased on an exchange that was not “established by the State.” Obamacare’s subsidies were created to paper over the cost of the law’s many expensive mandates and regulations by passing costs from policyholders to taxpayers. Since the subsidies are linked to the employer mandate tax penalties and the individual mandate tax penalties, the rule also extends those penalties to people and employers in states that opted not to create their own exchange. As a result, the IRS rule authorizes hundreds of billions of dollars in taxes and spending beyond what Congress allowed.

The Obama administration argues that its interpretation is “consistent with the language, purpose, and structure” of the law. The IRS regulation says that “the relevant legislative history does not demonstrate that Congress intended to limit the premiums tax credit to State Exchanges.” This is contrary to comments made by Jonathan Gruber, a chief Obamacare architect, who said in July 2012: “If you’re a state and you don’t set up an exchange that means your citizens don’t get their tax credits.”

The court’s decision in this case will affect 37 states that chose not to create an exchange, opting for the federal exchange in that state.

What Will Happen at the Supreme Court?

In addition to the King case, other challenges have arisen to the administration’s interpretation in federal court, including the D.C. Circuit in its consideration of the Halbig case. In each case, the challengers argue that the plain language of the law clearly does not allow for subsidies and the corresponding tax penalties in states with federal exchanges.

No date has been set for oral argument before the Supreme Court in the King case, but it appears the parties’ briefing schedule will follow regular order for the court. Since the court’s calendar is full until early March, the case will most likely be heard no earlier than the first week of March.