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Breaking! Supreme Court Will Hear Subsidy Challenge

The Supreme Court has announced that it will take the case of King v. Burwell, a lawsuit challenging the Internal Revenue Service’s decision to grant health insurance premium subsidies to individuals enrolling on federally-run health care exchanges. This is significant: if the subsidies are struck down, insurance costs for many will skyrocket.

What’s so controversial about the subsidies? Currently, all Americans with incomes up to 400 percent of poverty are considered eligible for subsidies to cover the costs of their health insurance premiums. However, that is only because the administration unilaterally decided to grant subsidies to everyone — the Affordable Care Act does not, in fact, grant subsidies to all enrollees. The text of the law provides that tax credits are available only to the insured who sign up via a health exchange “established by the State” under Section 1311 of the Affordable Care Act.  A completely different section of Obamacare, Section 1321, discusses federally-established exchanges.

But only 14 states created their own exchanges; the federal government was forced to run the exchanges for the other 36 states. Under the text of the law, individuals in those 36 states are not subsidy-eligible. However, the subsidies are what make Obamacare-compliant insurance plans affordable for many, and the idea of offering unsubsidized insurance in the majority of U.S. states was less than appealing to the Obama administration. As a result, and contrary to the text of the ACA, the Internal Revenue Service (IRS) decided to interpret the provision to allow enrollees to receive subsidies in its federally-run exchanges.

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