(Bloomberg) — The U.S. Supreme Court agreed to consider a challenge to the subsidies that are a linchpin of the Patient Protection and Affordable Care Act (PPACA), accepting a case that suddenly puts President Barack Obama’s health-care law under a new legal cloud.
Two years after upholding much of the law by a single vote, the justices today said they will hear a Republican-backed appeal targeting tax credits that have helped more than 4 million people afford insurance.
A ruling blocking those credits might unravel PPACA, which is also known as the ACA, making other provisions ineffective and potentially destabilizing insurance markets in much of the country. The high court’s decision to hear the case comes days before the start of the law’s second open-enrollment season. A decision will come by June.
Health insurers, which have gained millions of new customers through the law, sank lower in New York trading. UnitedHealth Group Inc., the biggest U.S. insurer by sales, slid 2.1 percent to $94.19 at 1 p.m. WellPoint Inc. slid 1.8 percent to $125.50, and Aetna Inc. fell 1.3 percent to $83.64.
Hospitals, which must absorb costs when patients are uninsured, also dropped. HCA Holdings Inc. fell 2.9 percent to $67, and Tenet Healthcare Corp. slid 1.9 percent to $50.23.
‘Vigorous defense’
At the White House, Obama administration spokesman Josh Earnest defended the measure.
“This is a law that is working and has generated significant benefits for working families and small-business owners all across the country, and that’s why you’re going to see a vigorous defense” by the administration, Earnest said.
The justices will consider an appeal filed by four Virginia residents seeking to block the subsidies in 36 states. The appeal says the Obama administration is engaging in a “gross distortion” of the law’s wording by granting billions of dollars in tax credits to people in those states.
The appeal, filed by Washington lawyer Michael Carvin on behalf of four Virginia residents, said immediate review was “imperative” given the money at stake and the steps being taken by employers, consumers and insurers to comply with the measure.
The law, intended to provide coverage to tens of millions of uninsured Americans, has been attacked by Republicans since it was passed on a party-line vote in 2010.
More than 100,000 anti-Obamacare ads aired before the Nov. 4 election as Republicans sought to exploit what they saw as a Democratic liability. While many provisions are popular, a majority of Americans say they disapprove of the law, polls show.
13 million
Enrollment for the second year of coverage under Affordable Care Act plans begins on Nov. 15 and closes Feb. 15. The Congressional Budget Office has estimated that 13 million people will be signed up next year.
The legal dispute centers on a four-word statutory phrase. The law says people qualify for tax credits when they buy insurance on an online marketplace “established by the state.”
Those words are significant because only 14 states have set up their own marketplaces, known as exchanges. The rest have left the job to the U.S. Department of Health and Human Services (HHS), as the law permits. The question is whether people can collect the subsidies even if they buy policies through an HHS-run exchange.