In a major victory for President Obama, the Supreme Court on Thursday upheld the broad reach of his healthcare law, ruling the government may continue to provide tax subsidies for low- and middle-income people who buy insurance nationwide, even in states that did not create an official insurance exchange of their own.
The 6-3 decision rejects a second conservative challenge to the law, one which could have left more than 6 million Americans scrambling to pay for their coverage.
The ruling is a crucial win for the Democratic White House, now that Republicans control the House and Senate. Had the high court ruled for the conservative challengers, it would have put the fate of the law in the hands of GOP leaders on Capitol Hill.
President Obama declared it a “good day for America," saying the "Affordable Care Act is here to stay."
“As the dust has settled,” he said, “there can be no doubt that the law is working.”
California officials and consumer groups cheered the ruling.
"Now that the Supreme Court has upheld the Affordable Care Act once again, we hope we can stop debating a 5-year-old law and discuss additional ways to reduce health costs," said Anthony Wright, executive director of Health Access California, a consumer advocacy group.
A court ruling against the Obama administration in the King vs. Burwell case wouldn't have had any immediate effect on Covered California and its 1.2 million consumers receiving subsidies because it's a state-run marketplace.
Chief Justice John G. Roberts Jr., writing for the court, said tax credits under the law should also be "available to individuals in states that have a federal exchange."
If no tax credits were allowed in these states, it “could well push a state’s individual market into a death spiral,” he wrote.
Roberts said the text and structure of the law make clear that Congress intended the insurance subsidies to be available nationwide.
“Had Congress meant to limit tax credits to state exchanges, it likely would have done so in the definition of an ‘applicable taxpayer’ or in some other prominent manner,” he wrote. “It would not have used such a winding path of connect-the-dots provisions about the amount of the credit.”
The court’s three most conservative justices dissented. Justice Antonin Scalia called the majority’s opinion “quite absurd." He said it was inarguable that the law as written intended tax subsidies to be limited to the small number of states that established exchanges of their own.
The majority’s decision, Scalia said, "rewrites the law to make tax credits available everywhere. We should start calling this law SCOTUScare.”
He said the two Roberts opinions upholding the health care law "publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others and is prepared to do whatever it takes to uphold and assist its favorites."
Roberts rejected the conservative challenge that said the court should focus on a four-word passage that seemed to limit insurance subsidies to state-established exchanges.
When interpreting laws, “we must read the words in context .… Our duty, after all, is to construe statutes, not isolated provisions,” he wrote.
The decision is a vindication for the president, who had openly questioned the court’s decision to hear the latest challenge.
By affirming the system of tax subsidies, the justices have the put the law on a firmer legal ground as a nationwide program to help all Americans obtain health insurance they can afford.
The ruling will also come as a relief to Democratic lawmakers, Congressional aides and health policy advocates who scrambled to put the complex law together late in 2009. They had devised an intricate plan to build on the nation’s private insurance system and require everyone with a taxable income to buy insurance or pay a penalty. For those who could not afford the full cost, they extended government-paid insurance for some and offered tax subsidies for others. These subsidies are offered to those with incomes up to $95,000 for a family of four.
However, the House and Senate passed different versions of the healthcare law in 2009. After the Democrats unexpectedly lost their 60-vote Senate supermajority after the death of Sen. Edward Kennedy, the two houses agreed early in 2010 to jointly pass the bill that had already passed the Senate.
Only later did the bill’s supporters realize the Senate version included what critics first called a “wording glitch” that threatened the subsidies. One provision said the subsidies were to help pay for insurance purchased on an exchange “established by the state.” That limitation loomed large by 2012, since most of the states had opted to rely on an exchange established by federal authorities rather than set up their own.
Aware of the problem, the Internal Revenue Service issued a regulation in 2012 that authorized tax credits for insurance purchased on any government-sponsored exchange, whether state or federal.
But until Thursday, it appeared that this wording flaw threatened to bring down the entire statute.
The conservative lawyers who led the legal attack argued that Democratic lawmakers had deliberately inserted this reference to state exchanges to force states to bear the funding burden for their own insurance exchanges.
Obama’s lawyers ridiculed this claim. They said the Democrats who supported the law wanted to provide insurance subsidies nationwide, and they knew that some Republican-led states would refuse to set up their own exchanges. The lawyers noted that the law included a provision for federal officials to set up exchanges in states that did not create their own, clear evidence of Congress' intent.
In the end, the justices agreed that the law read as a whole allowed the government to offer subsidies nationwide.
On Twitter: @DavidGSavage
Staff writers Christi Parsons in Washington and Chad Terhune in Los Angeles contributed to this report.