(Bloomberg) — The U.S. Supreme Court is poised to consider the fate of the Patient Protection and Affordable Care Act (PPACA) for the second time in three years, weighing an attack on tax credits designed to help millions of people afford insurance.
An hour-long argument Wednesday in Washington will provide the first real clues about the justices’ views on an appeal by four Virginia residents who would block the subsidies in the states with exchanges established by the U.S. Department of Health and Human Services (HHS).
A decision halting HHS exchange credits could make many core PPACA provisions that affect the commercial health insurance market ineffective, potentially causing the market for individual insurance policies to collapse in much of the country. Hospitals could be left with billions of dollars in unpaid bills.
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“This would be the greatest instance of judicial overreach in the modern history of the court,” Sen. Chris Murphy, a Democrat from Connecticut, told reporters on Tuesday. The court will rule by the end of June.
A decision against the administration would put pressure on the states, most of them Republican-controlled, that have refused to set up their own exchanges, as the insurance marketplaces are known. Residents of those states would face the prospect of losing tax credits. Congress could step in, though it is riven by opposition to PPACA. The Obama administration says it can do little on its own.
Arguments on King vs. Burwell (Case Number 14-114) center on a four-word phrase that has become a linchpin of PPACA. The measure says people qualify for tax credits when they buy insurance on an exchange “established by the state.”
PPACA drafters left that phrase out of a section of PPACA that lets HHS offer exchange services in states without their own exchanges.
More than 80 percent of exchange customers use the tax credit to reduce their share of the premium bill.
The challengers say the absence of the phrase in the HHS exchange section means premium tax credit subsidies aren’t available in the dozens of states that didn’t set up their own exchanges. Residents of those states instead use the HHS-established HealthCare.gov system.
The Obama administration says HHS exchanges can offer the subsidies.
“The ACA plainly limits subsidies to coverage purchased on state-established exchanges,” the challengers said in court papers filed by Washington lawyer Michael Carvin, who will argue the case.
The Obama administration is defending an Internal Revenue Service (IRS) rule that interpreted the law to mean that HHS exchanges can offer the premium tax credit subsidies. The administration says the court should look beyond the disputed phrase to the rest of the law and to its broad purpose of providing coverage to uninsured Americans nationwide.
“The act was debated, evaluated, and passed under the universal understanding that tax credits would be available in every state — including states with federally facilitated exchanges,” U.S. Solicitor General Donald Verrilli said in court papers.
The hospital and health-insurance industries are backing the administration. That includes HCA Holdings Inc. (NYSE:HCA), the hospital chain that is the nation’s largest private health-care provider.
Would-be spectators began lining up Tuesday night in hope of securing a seat for what may prove to be a historic argument. About 200 PPACA supporters gathered in front of the court Wednesday morning, chanting slogans and waving brown-and-white signs that said, “Don’t Take My Care.”