## Facts

- The Affordable Care Act (ACA) reformed individual health insurance markets through guaranteed issue and community rating, an individual coverage requirement, and premium tax credits for eligible low- and moderate-income individuals.
- The ACA directed each state to establish an “Exchange,” and provided that if a state did not do so, the federal government would establish an Exchange for that state.
- The tax-credit provision, 26 U.S.C. § 36B, ties the amount and availability of premium tax credits to enrollment in coverage through “an Exchange established by the State.”
- Virginia did not establish its own Exchange; Virginia residents obtained coverage through a federally facilitated Exchange.
- The IRS issued a regulation making premium tax credits available for insurance purchased on both state-established and federally facilitated Exchanges.
- Petitioners (Virginia residents) argued that § 36B permits credits only for insurance purchased on an Exchange established by a state, making them ineligible for credits; without credits, their coverage would be unaffordable and they would fall within the ACA’s affordability exemption from the coverage requirement.
- The district court dismissed the challenge; the Fourth Circuit affirmed, treating the statute as ambiguous and upholding the IRS rule as permissible.

## Issues

1. Whether § 36B authorizes ACA premium tax credits for individuals who purchase insurance on a federally facilitated Exchange in a state that did not establish its own Exchange.
2. Whether the meaning of “Exchange established by the State” must be determined by the Court or deferred to the IRS under Chevron.

## Decision

- The Supreme Court affirmed the Fourth Circuit in a 6–3 decision authored by Chief Justice Roberts.
- The Court held that § 36B allows premium tax credits for insurance purchased on any Exchange created under the ACA, including federally facilitated Exchanges.
- Reading the disputed phrase in the context of the ACA’s overall structure, the Court concluded that limiting credits to state Exchanges would undermine the Act’s interlocking reforms and destabilize insurance markets in states with federal Exchanges.
- The Court declined to apply Chevron, reasoning that tax-credit availability is a question of deep economic and political significance that Congress would not implicitly delegate to the IRS.
- Justice Scalia, joined by Justices Thomas and Alito, dissented, arguing the statute unambiguously limited credits to state-established Exchanges and that the majority rewrote the law.

## Legal Principles

- Statutory terms must be interpreted in context and as part of the statute as a whole; a phrase that appears clear in isolation may be ambiguous when integrated into the larger statutory scheme.
- Courts may reject an interpretation that would make a major statutory program function in a way Congress plainly did not intend when the text, structure, and operation of the statute point to a different reading.
- On questions of deep economic and political significance within a major statute, courts may decide the best reading themselves rather than presume implicit delegation to an agency under Chevron.
- For purposes of § 36B, federally facilitated Exchanges are treated as Exchanges “established by the State,” permitting premium tax credits nationwide.

## Conclusion

The Court upheld IRS-authorized premium tax credits for insurance purchased on federally facilitated Exchanges, interpreting § 36B in light of the ACA’s structure to preserve the operation of the Act’s coordinated insurance-market reforms and resolving the issue without Chevron deference.


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