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King v. Burwell - 135 S. Ct. 2480 (2015)

Rule:

If the statutory language is plain, courts must enforce it according to its terms. But oftentimes the meaning, or ambiguity, of certain words or phrases may only become evident when placed in context. So when deciding whether the language is plain, courts must read the words in their context and with a view to their place in the overall statutory scheme. The courts' duty, after all, is to construe statutes, not isolated provisions.

Facts:

The Patient Protection and Affordable Care Act adopted a series of interlocking reforms designed to expand coverage in the individual health insurance market. First, the Act barred insurers from taking a person’s health into account when deciding whether to sell health insurance or how much to charge. Second, the Act generally required each person to maintain insurance coverage or make a payment to the Internal Revenue Service. And third, the Act gave tax credits to certain people to make insurance more affordable. In addition to those reforms, the Act required the creation of an “Exchange” in each State to serve as a marketplace that would allow people to compare and purchase insurance plans. The Act gave each State the opportunity to establish its own Exchange but provided that the Federal Government would establish the Exchange if the State does not. Petitioners were four individuals who live in Virginia where there was a Federal Exchange. They did not wish to purchase health insurance. In their view, Virginia's Exchange did not qualify as “an Exchange established by the State under 42 U.S.C.S. § 18031" so they should not receive any federal tax credits. That would make the cost of buying insurance more than eight percent of petitioners' income, exempting them from the Act's coverage requirement. As a result of the IRS Rule, however, petitioners would receive tax credits. That would make the cost of buying insurance less than eight percent of their income, which would subject them to the Act's coverage requirement. Petitioners challenged the IRS Rule in Federal District Court. The District Court dismissed the suit, holding that the Act unambiguously made tax credits available to individuals enrolled through a Federal Exchange. The Court of Appeals for the Fourth Circuit affirmed. The Fourth Circuit viewed the Act as ambiguous.

Issue:

Did the Patient Protection and Affordable Care Act unambiguously make federal tax credits available to individuals enrolled in an insurance plan through a Federal Exchange in their states?

Answer:

Yes.

Conclusion:

On a writ of certiorari, the Supreme Court of the United States held that the phrase "an exchange established by the state under 42 U.S.C.S. § 18031," as set forth in a section of the Tax Code, 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. The phrase was interpreted by the Court 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. The Court affirmed the judgment.

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