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Supreme Court Takes up Challenge to ACA Premium Assistance Tax Credit

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Between now and late June, the U.S. Supreme Court is expected to rule on an important provision of the Patient Protection and Affordable Care Act: the Code Sec. 36B premium assistance tax credit. The Supreme Court has heard oral arguments in King v. Burwell, 2014-2 ustc ¶50,367, where the plaintiffs argue that the IRS erred in extending the credit to enrollees in federally facilitated Health Insurance Marketplaces (also known as Exchanges).

Tax credit

The Affordable Care Act provides that individuals may obtain health insurance through the Marketplace to fulfill the requirement to carry minimum essential health coverage, unless exempt. Since enactment of the Affordable Care Act, the federal government has created Marketplaces in states that have elected not to create their own Marketplaces.

The Affordable Care Act also provides the Code Sec. 36B credit to qualified individuals who purchase health insurance through the Marketplace. IRS regulations allow qualified enrollees in both federal-facilitated Marketplaces and state-run Marketplaces to claim the credit. According to the U.S. Department of Health and Human Services, more than two-thirds of all enrollees are eligible for the credit, which helps offset the cost of health insurance. Eligibility for the credit is determined under a number of factors, including the relationship of the enrollee’s income with the federal poverty limit.

The IRS regulations are at the crux of the controversy. The plaintiffs in King argue that the regulations are not in agreement with the statute. They cite language in the statute that reads, “Exchange established by a State under Section 1311.” According to the plaintiffs, the Code Sec. 36B credit is only available to individuals who obtain health insurance through state-run Marketplaces. Enrollees in coverage through federally facilitated Marketplaces, they argue, are ineligible to claim the credit.


A federal district court and the Fourth Circuit Court of Appeals disagreed with the plaintiffs. In July 2014, the Fourth Circuit found that the regulations were a permissible interpretation of the Affordable Care Act. The Fourth Circuit noted that without access to the credit, millions of enrollees in federally facilitated Marketplaces could risk losing health insurance coverage because of unaffordability.

After the Fourth Circuit ruled in favor of the IRS, the plaintiffs asked the Supreme Court to take up the case. The Supreme Court agreed and scheduled oral arguments for March in Washington, D.C.

Oral arguments

Attorneys for the plaintiffs and the federal government appeared before the Supreme Court on March 4. The justices asked a number of questions. “If Congress did not want the phrase established by the state to mean what that would normally be taken to mean, why did they use that language,” Justice Samuel Alito asked. “This took a year and a half for anyone to even notice this language,” Justice Elena Kagan added. “If we read it (the PPACA) in the way you (the plaintiffs) are saying, then we are going to read the statute as intruding on the federal-state relationship because then the states are going to be coerced into establishing their own exchanges,” Justice Sonia Sotomayor said.

Justice Kagan said that the courts frequently look to the entirety of a statute to ascertain meaning of certain provisions. “We look at the whole text, the particular context, the more general context, to try to make everything harmonious with everything else,” Kagan said.

Justice Antonin Scalia questioned if the explanation for the challenged provision was intentional. “It prevents the federalization of the entire thing,” Scalia said. Scalia also questioned the government’s argument that Congress would be reluctant to pass a legislative fix. Congress adjusts, enacts a statute that takes care of the problem. “It happens all the time,” Scalia said.


The Obama administration has predicted that the Supreme Court will uphold the IRS regulations and has denied the existence of any contingency plans in the event the regulations are struck down. House and Senate Republicans are reportedly working on legislation if the regulations are struck down, but few details have emerged from the behind-the-scenes talks. Like other high-profile cases, the justice may wait until late June to announce their decision. Our office will keep you posted of developments.