Divided United States Supreme Court Upholds Tax Credits Under Affordable Care Act
PIERRE, S.D. – Attorney General Marty Jackley announced today that the United States Supreme Court issued a divided decision in King et al. v. Burwell, et.al., upholding section 36B of the Internal Revenue Code, which allows tax credits for insurance purchased on any exchange under the Act.
“From day one South Dakota challenged the federal takeover of healthcare as infringing upon our individual and state rights. While today’s opinion allows this federal takeover to continue, it highlights the obvious concern with both the U.S. Department of Health and the IRS’ implementation of federal healthcare,” said Jackley.
The Court held the Internal Revenue Service (IRS) permissibly promulgated regulations to extend tax-credit subsidies to coverage purchased through federal exchanges. The Court found the credits are “necessary for the Federal Exchange to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.”
A strongly worded dissent criticized the majority opinion, noting that a strict interpretation of the Act would prevent the Act from working as well as hoped, so the Court “rewrites the law to make tax credits available everywhere”. The Oklahoma District Court held that the ACA does not allow subsidies for insurance purchased on federal exchanges. There are 34 states, including South Dakota, who declined to establish Exchanges and two states who failed to timely establish Exchanges for 2014.
Section 36B of the Internal Revenue Code, which was enacted as part of the Patient Protection and ACA, authorizes federal tax credit subsidies for health insurance coverage that is purchased through an “Exchange established by the State under section 1311” of the ACA. IRS promulgated regulations to extend tax-credit subsidies to coverage purchased through Exchanges established by the federal government under Section 1321 of the ACA.
The last estimate to run a state based exchange was done back in 2011 through the Health Insurance Exchange Task Force. Navigant estimated it would cost South Dakota taxpayers $45,233,699 to implement a hosted exchange and an additional 6 to 8 million in state revenues to sustain the State run Exchange.