Supreme Court upholds Obamacare tax credits in King v. Burwell ruling

The U.S. Supreme Court on Thursday upheld the nationwide availability of tax subsidies that are crucial to the implementation of President Barack Obama's signature healthcare law, handing a major victory to the president.

The court ruled on a 6-3 vote that the 2010 Affordable Care Act, widely known as Obamacare, did not restrict the subsidies to states that establish their own online healthcare exchanges. It marked the second time in three years that the high court ruled against a major challenge to the law brought by conservatives seeking to gut it.

Chief Justice John Roberts was joined by fellow conservative Justice Anthony Kennedy and the court’s liberal members in the majority.

"Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them," Roberts wrote, adding that nationwide availability of the credits is required to "avoid the type of calamitous result that Congress plainly meant to avoid."

Shares of hospital operators, health services providers and insurers rallied broadly following the court's decision to uphold the subsidies. Top gainers included hospital companies Tenet Healthcare Corp., up 8.8 percent, and Community Health Systems Inc., up 8.5 percent.

The decision means the subsidies will remain not just in the 13 states that have set up their own exchanges and the three states that have state-federal hybrid exchanges, but also in the 34 states that use the exchange run by the federal government.

The case centered on the tax subsidies offered under the law, passed by Obama's fellow Democrats in Congress in 2010 over unified Republican opposition, that help low- and moderate-income people buy private health insurance. The exchanges are online marketplaces that allow consumers to shop among competing insurance plans.

The question before the justices was whether a four-word phrase in the expansive law saying subsidies are available to those buying insurance on exchanges "established by the state" has been correctly interpreted by the administration to allow subsidies to be available nationwide

Roberts wrote that although the conservative challengers’ arguments about the plain meaning of the statute were “strong,” the “context and structure of the act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase.”

Scalia dissents

Justice Antonin Scalia took the relatively rare step of reading a summary of his dissenting opinion from the bench.

In his reading of the statute, "it is hard to come up with a reason to use these words other than the purpose of limiting credits to state exchanges," Scalia said.

"We really should start calling the law SCOTUScare," he added, referencing the court’s earlier decision upholding the constitutionality of the law. SCOTUS is the acronym for the Supreme Court of the United States.

The ruling will come as a major relief to Obama as he seeks to ensure that his legacy legislative achievement is implemented effectively and survives political and legal attacks before he leaves office in early 2017.

The current system will remain in place, with subsidies available in all 50 states. If the challengers had won, at least 6.4 million people in at least 34 states would have lost subsidies that help low- and moderate-income people afford private health insurance. The average subsidy is $272 per month.

A loss for the Obama administration also could have had a broader impact on insurance markets by deterring younger, healthier people from buying health insurance, which would lead to premiums rising for older, less healthy people who need healthcare most, according to analysts.

The Democratic-backed law aimed to help millions of Americans who lacked any health insurance afford coverage.

The Obama administration has hailed the law as a success, saying 16.4 million previously uninsured people have gained health insurance since it was enacted. There are currently around 26 million people without health insurance, according to government figures.

Leading up the high court's ruling, Obama warned of far-reaching consequences of overturning a law that he said had become "woven into the fabric of America." In a June 9 speech, Obama said taking away health insurance provided under the law to millions of people who need it the most "seems so cynical."

Conservatives have fought Obamacare from its inception, calling it a government overreach and "socialized medicine."

Opponents repeatedly but unsuccessfully sought to repeal it in Congress and launched a series of legal challenges. In 2012, Roberts, a conservative appointed by Republican President George W. Bush, cast the deciding vote in a 5-4 decision that upheld the law on constitutional grounds, siding with the court's four liberals.

The current case started as a long-shot legal challenge by conservative lawyers that oppose the law. Financed by a libertarian Washington group called the Competitive Enterprise Institute, the lawyers recruited four people from Virginia to be the plaintiffs. The lead plaintiff was a self-employed limousine driver named David King.

They are eligible to receive the subsidies but oppose the measure because they object to the Obamacare "individual mandate," which went into effect in 2014, that requires individuals to obtain health insurance.

A district court judge ruled for the government, as did the federal appeals court in Richmond, Virginia. But the Supreme Court then agreed to hear it.

The challengers said that the four-word phrase in the law indicates that only people who have bought insurance on state-established exchanges qualify for the tax-credit subsidies.

The Obama administration, backed by the healthcare industry, said other provisions in the law made clear that Congress intended the subsidies to be available nationwide regardless of whether states set up their own exchanges or leave the task to the federal government.

The case is King v. Burwell, U.S. Supreme Court, No. 14-114.

(Reporting by Lawrence Hurley; Editing by Will Dunham)