The Affordable Care Act (ACA) or ObamaCare authorizes tax credits to individuals whose household income is less than 400% of the poverty line and who are enrolled through an “Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act. . . .” 26 U.S.C. § 36B(c)(2)(A)(i). In addition, the law uses the term “established by the state” only when it refers to State-established Exchanges. 26 U.S.C. § 36B. When referring both to the federal Exchange and State-established Exchanges, the Act uses the phrase “Exchange established under this Act.” 42 U.S.C. § 18032(d)(3)(D)(i)(II).
Nonetheless, because only sixteen states and the District of Columbia have set up health care exchanges—the federal government operates an exchange in the other states—in May 2012, the IRS promulgated regulations authorizing tax credits to individuals who are enrolled through either a State-established Exchange or the federal Exchange established by the U.S. Department of Health and Human Services.
The IRS regulations were challenged by four lawsuits filed across the country, including four Virginia residents who do not want to purchase health insurance. All maintain that the IRS has no authority to issue billions of dollars in illegal subsidies to preserve ObamaCare, which is floundering due to the refusal of nearly three-quarters of the States to participate.
On July 22, 2014, the U.S. Court of Appeals for the Fourth Circuit upheld the IRS regulations. The petition for writ of certiorari was filed on July 31, 2014 and was granted on November 7, 2014. On December 29, 2014, MSLF filed its friend of the court brief. Oral arguments were conducted on March 4, 2015. On June 25, 2015, the Supreme Court 6-3 ruled that Congress intended the phrase “established by the State” to include exchanges established by States and by the U.S. Department of Health and Human Services.