IRC Section 36B (added by the ACA) provides that tax credits are available to individuals who purchase health insurance only on exchanges “established by the state.” Only 13 states and the District of Columbia have established state exchanges, while 37 states have federal exchanges. Loss of the subsidies for 6.4 million enrollees that purchased insurance through federal exchanges could have made coverage unaffordable, which could put ACA into a death spiral.
The US Supreme Court recently ruled (6-3) that federal tax subsidies under the ACA are available to people who purchase individual health policies in both federal and state exchanges. The Administration argued that the overall intent of the ACA is clearly to provide tax credits in both federal and state exchanges. The majority opinion said “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter.” Click here for more details.