Facts of the case
In 2010, Congress passed the Affordable Care Act (ACA) to increase the number of Americans covered by health insurance and decrease the cost of health care. The ACA required each state to establish an exchangethrough which people could purchase health care coverage, and if a state elected not to do so, the federal government would establish one through the Secretary of Health and Human Services. The ACA also required people to obtain the minimum essential coverage or pay a tax penalty unless they fell within an unaffordability exemption for low-income individuals. To limit the number of people that would fall into such an exemption, the ACA provided for tax credits that are calculated based on the health plan in which an individual enrolls through the exchange. Although the legislative language of the ACA pertaining to the tax credits only referred to the exchanges established by the states, the Internal Revenue Service (IRS) created a regulation that made the tax credits available to those enrolled in plans through federal as well as state exchanges.Virginia declined to establish a state-run exchange and has one operated by the federal government. The plaintiffs are a group of Virginia residents who, without the tax credits, would fall under the unaffordability exception and be exempt from having to purchase health insurance. They sued and argued that the IRS regulation exceeded the agency’s statutory authority, is arbitrary and capricious, and is contrary to the law in violation of the Administrative Procedure Act. The district court granted the defendants’ motion to dismiss, and the U.S. Court of Appeals for the Fourth Circuit affirmed.
The Court affirmed the ruling of the Court of Appeals, holding that Chevron deference to the IRS’s interpretation was inappropriate where tax credits were a key reform, and the availability of credits on federal exchanges was a question of deep economic and political significance. The phrase an exchange established by the state under 42 U.S.C.S. § 18031 ,as set forth in 26 U.S.C.S. § 36B , was ambiguous given the direction to establish federal exchanges when a state opted not to create an exchange and statutory provisions assuming that tax credits were to be available on both types of exchanges. Lastly, the phrase was interpreted to allow tax credits for insurance purchased on any exchange created under the Affordable Care Act as those credits were necessary for the federal exchanges to function like their state exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.
- Advocates: Michael A. Carvin for the petitioners Donald B. Verrilli, Jr. Solicitor General, Department of Justice, for the respondents
- Petitioner: David King, et al.
- Respondent: Sylvia Mathews Burwell, Secretary of Health and Human Services, et al.
- DECIDED BY:Roberts Court
- Location: United States District Court for the Eastern District of Virginia, Richmond Division
|Citation:||576 US _ (2015)|
|Granted:||Nov 7, 2014|
|Argued:||Mar 4, 2015|
|Decided:||Jun 25, 2015|