# Rewriting the Law: Examining the Process That Led to the Obamacare Subsidy Rule 

June 5, 2015 • Public Comments 

By [Michael F. Cannon](https://www.cato.org/people/michael-f-cannon) 

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**I. Potential Economic Savings under Proper Statutory Construction**

**1. If the Supreme Court strikes down the availability of premium tax credits via federal government-run health insurance exchanges, please explain how it will affect:**

**a. Federal Spending Generally**

As you are aware, the Patient Protection and Affordable Care Act (ACA) authorizes refundable “premium assistance tax credits” to certain taxpayers who enroll in coverage “through an Exchange established by the State,”[1](#_ednref1) much as it conditioned the renewal of Exchange start-up grants on states taking steps to establish Exchanges and implement other parts of the law,[2](#_ednref2) and conditioned continued federal Medicaid grants on states expanding Medicaid eligibility.[3](#_ednref3) The Exchange subsidies trigger tax penalties under the ACA’s individual mandate and employer mandate. The plaintiffs in *King v. Burwelll* challenged an Internal Revenue Service regulation implementing those taxes and subsidies in the 38 states that refused or otherwise failed to establish Exchanges.

In a 6–3 ruling issued on June 25, 2015, the Supreme Court held the IRS did not have the authority to issue the challenged regulation. Instead, the Court itself interpreted the ACA not only to permit, but to require the IRS to issue “premium assistance tax credits” in states that failed to establish Exchanges.[4](#_ednref4) The Court’s ruling expanded the reach of the ACA’s individual and employer mandates beyond what the Court acknowledged the plain meaning of the operative text allowed. As a result, *King v. Burwelll* is subjecting to taxation as many as 100 million individuals and employers whom Congress had expressly exempted.[6](#_ednref6)

The finality of the Court’s ruling in *King v. Burwelll* does not make that ruling any less incorrect. Jonathan Adler and I examine the flaws in the King ruling in the attached article.[6](#_ednref6)

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##### Rewriting the Law: Examining the Process That Led to the Obamacare Subsidy Rule 

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##### About the Author 

[![Michael F. Cannon](/sites/cato.org/files/styles/author_picture/public/2021-01/Michael%20Cannon.jpg?itok=0UROn8Dc)](/people/michael-f-cannon) 

##### [Michael F. Cannon](/people/michael-f-cannon)

Director of Health Policy Studies, Cato Institute

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##### Notes

[1](#_edn1) PPACA § 1401(c)(2)(A)(i); 26 U.S.C. § 36B(c)(2)(A)(i).

[2](#_edn2) 42 U.S.C. § 18031(a).

[3](#_edn3) But see *NFIB v. Sebelius*, 132 S. Ct. 2566 (2012).

[4](#_edn4) *King v. Burwell*, 135 S. Ct. 2480, 2495 (2015), [http://www.supremecourt.gov/opinions/14pdf/14–114\_qol1.pdf](http://www.supremecourt.gov/opinions/14pdf/14-114_qol1.pdf).

[5](#_edn5) See Michael F. Cannon, “Benefits of ‘*King v. Burwell*’: More Jobs, Higher Incomes & 70 Million Freed From Illegal Taxes,” *Forbes​.com*, June 24, 2015, [http://​www​.forbes​.com/​s​i​t​e​s​/​m​i​c​h​a​e​l​c​a​n​n​o​n​/​2​0​1​5​/​0​6​/​2​4​/​b​e​n​e​f​i​t​s​-​o​f​k​i​ng-v-…](http://www.forbes.com/sites/michaelcannon/2015/06/24/benefits-ofking-v-burwell-more-jobs-higher-incomes-70-million-freed-from-illegal-taxes/); and Michael F. Cannon, “*King v. Burwell* Expanded Obamacare Even More Than You Know,” *National Review Online*, July 29, 2015, [http://​www​.nation​al​re​view​.com/​a​r​t​i​c​l​e​/​4​2​1​7​2​3​/​k​i​n​g​-​v​-​b​u​r​w​e​l​l​-​e​x​p​a​n​d​ed-ob…](http://www.nationalreview.com/article/421723/king-v-burwell-expanded-obamacare-even-more-you-know-michaelcannon).

[6](#_edn6) Jonathan H. Adler and Michael F. Cannon, “*King v. Burwell* and the Triumph of Selective Contextualism,” *Cato Supreme Court Review*: 2014–2015 (Ilya Shapiro, ed.), October 1, 2015, [https://www.cato.org/sites/cato.org/files/serials/files/supreme-court‑r…](https://www.cato.org/sites/cato.org/files/serials/files/supreme-court-review/2015/9/2015-supreme-court-review-chapter-2.pdf).

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