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U.S. Supreme Court Upholds IRS Subsidy Authority Under Affordable Care Act

By: Lenna R. Chambers and Jill E. Hall, Attorneys at Law
Health Care Reform Alert
July 7, 2015

The Supreme Court of the United States issued an important decision today, ruling 6-3 that the Internal Revenue Service (IRS) had authority under the Affordable Care Act to provide tax subsidies to individuals who purchased health coverage through Federally-established health insurance exchanges operating in more than 30 states. The Court's decision in King v. Burwell denied challenges to the authority of the IRS under the portion of the Affordable Care Act that authorized tax subsidies to individuals purchasing coverage through an exchange "established by the State." While the Affordable Care Act required all states to establish exchanges, it also provided that in the event a state refused, the Federal government would step in to establish the exchange. Many states ultimately refused. The Court determined that the Affordable Care Act clearly provided subsidies for health coverage purchased in all states, not only in those states establishing exchanges independent from those established by the Federal government.

Although additional legal and political challenges to the Affordable Care Act can be expected in the future, as this decision shows, employers sponsoring health plans for employees should continue to assume full compliance with the Affordable Care Act is required.

Questions about the decision or the Affordable Care Act's impact on employer-sponsored health plans can be directed to Jill Hall, Lenna Chambers, or your Bowles Rice lawyer.