The US supreme court has agreed to hear a new challenge to the Affordable Care Act that, if successful, could threaten the viability of President Obama’s landmark healthcare reforms two years after the justices narrowly upheld the heart of the law.



The case centers on federal tax subsidies designed to make healthcare affordable for millions of middle-and-low-income Americans. Challengers argue that a majority of the premium tax credits are illegal.

At issue is whether the healthcare law’s subsidies program extends to consumers who purchase health insurance through virtual marketplaces, known as exchanges, formed by the federal government.

Taken literally, the law states that health insurance subsidies can only be given through an “exchange established by the State”. A victory for the challengers would make health insurance premiums more expensive for the nearly five million Americans who buy coverage under the 34 federally-run exchanges.

The Internal Revenue Service (IRS), which wrote the rules for how the subsidies are applied, said health insurance tax credits are allowed for all eligible consumers, regardless of whether they buy their health insurance through an exchange operated by the state or one operated by the federal government.

Timothy Jost, an expert on US health law, said a ruling against the administration could imperil the health care law, but said he believes such a decision is unlikely.

“If the supreme court decides for the plaintiffs based on really a very crabbed and limited reading of the statute, millions of Americans could lose access to health insurance,” Jost said.

White House press secretary Josh Earnest said the lawsuits were politically-motivated, and said the administration is confident the court will recognize the congressional intent behind the law is for qualifying customers, regardless of where they live, to receive the financial assistance they need.

“These lawsuits won’t stand in the way of the Affordable Care Act and the millions of Americans who can now afford health insurance because of it. We are confident that the financial help afforded millions of Americans was the intent of the law and it is working as Congress designed,” Earnest said in a statement on Friday.

The Affordable Care Act was passed on a party-line vote in 2012, and since then, Republicans have tried at least 50 times to repeal or significantly roll back the law.

But what Congress intended when drafting the law is still up for debate, according to Kip Piper, a healthcare consultant. He said that at the time the law was first introduced, there were some who believed offering subsidies would galvanise the states to set up the exchange, and that the federally-operated exchanges were designed as a fall-back plan.

“There were certainly people that read it literally as what it said, and interpreted it as a big financial incentive and political incentive for states to participate, and to build the exchanges,” he said. “But after a while, nobody paid any attention to it.” Now, the majority of states are served by federally facilitated exchanges.

In the 2012 decision, chief justice John Roberts, sided with the four liberal judges in favor of upholding the law, while the four conservative judges held that the law is “invalid in its entirety”. At least four justices must agree that a case deserves review before the court takes decided to hear it. The justices, as is normal, did not say why they agreed to take up the case, or who supported the decision to take it up.

In July, a panel of federal appeals court judges sitting in Washington DC, agreed with the challengers, saying the IRS regulations are not permissible under the Affordable Care Act as it is currently written. The DC court held that under the law, tax credits can be applied only in the 16 states that have set up their own exchanges.

Later that day, however, the federal appeals court for the fourth circuit, based in Richmond, Virginia, came to the opposite conclusion, ruling that the wording in the statute is ambiguous and as such open to multiple interpretations. This set up a split, that was then eliminated when the full federal appeals court in DC threw out the panel’s ruling.

A writer at Scotusblog said the court’s decision to take up the case is a bad sign for the healthcare law.

“What’s troubling is that four justices apparently think – or at least are inclined to think – that King was wrongly decided,” Nicholas Bagley wrote on Friday. “The challengers urged the Court to intervene now in order to resolve “uncertainty” about the availability of federal tax credits. In the absence of a split, however, the only source of uncertainty is how the supreme court might eventually rule.”