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June 25, 2015 3:48 pm

Supreme Court upholds Obamacare subsidies

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Protesters demonstrate in favour of the healthcare reforms outside the Supreme Court on Wednesday©Reuters

Protesters demonstrate in favour of the healthcare reforms outside the Supreme Court earlier this year

The US Supreme Court handed President Barack Obama a huge victory, upholding a core component of his still-controversial overhaul of the nation’s healthcare system and safeguarding insurance coverage for more than 6m Americans.

In a 6-3 decision, the court ruled that federal tax subsidies designed to make health insurance more affordable for low and middle income consumers can be provided nationwide under Mr Obama’s Affordable Care Act.

That is a big win for a president who is moving to shore up both his domestic and foreign policy legacies in his final 575 days in office on issues ranging from closing the biggest trade deal in a generation to securing a landmark nuclear agreement with Iran.

The ruling caps 24 hours that some pundits were describing as among the best of his presidency, with the Supreme Court upholding a tool the administration has used to combat housing discrimination in a separate case, and with Mr Obama securing the “fast-track” powers he needs on trade after a difficult battle with his own party.

Having already survived a previous challenge in the nation’s highest court, Thursday’s ruling on “Obamacare” will further cement the legality of legislation widely considered Mr Obama’s signature domestic achievement, and make it harder for its conservative opponents to chip away at a law they have vowed to repeal.

“Today, after more than 50 votes in Congress to repeal or weaken this law, after a presidential election based in part on preserving or repealing this law, after multiple challenges to this law before the Supreme Court, the Affordable Care Act is here to stay,” the president said. “This is a good day for America. Let’s get back to work.”

The ruling, in a case known as King v Burwell, centred on a key tenet of the ACA: who should be eligible for tax credits that subsidise health insurance purchased by poorer consumers.

Aimed at dramatically reducing America’s ranks of the uninsured, the law envisioned that states would set up their own exchanges, known as marketplaces, for their residents to buy coverage if they did not have it.

However, in a show of defiance, 34 states declined to do so, instead relying on the federal exchange,, to operate their systems.

Pointing to a single phrase in the legislation, “established by the state”, the law’s challengers argued that only those people who purchased insurance in the 16 states that set up their own marketplaces should be eligible for the tax credits.

Market reaction

Healthcare industry shake-up

Appointments, referrals and billing signs hang on a wall at a Community Clinic Inc. health center in Greenbelt, Maryland, U.S., on Wednesday, April 8, 2015. Led by the American Medical Association, three of the top five spenders on congressional lobbying have waged a campaign to urge Congress to revamp the way Medicare pays physicians and end the cycle of "doc fix" patches. Senate leaders predict quick action on House-passed legislation when Congress returns April 13 from its two-week recess. Photographer: Andrew Harrer/Bloomberg

The Supreme Court decision clears the way for a wave of consolidation in the healthcare industry, with analysts predicting the “big three” will soon become a “big five” as insurers position themselves for changes being ushered in by Obamacare, writes David Crow.

The enrolment of more than 16m uninsured Americans into insurance plans has created big opportunities for the industry, but significant challenges too. Individuals insured through the exchanges are more price-conscious than those who get cover via their employers, while the expansion of Medicaid and privatisation of Medicare offers new sources of revenue in a highly-regulated market.

Shares in UnitedHealth group, the largest of the insurers, added 2.7 per cent after the ruling, while Humana, the number five, jumped 7.5 per cent.

In a broad opinion written by Chief Justice John Roberts, the Supreme Court disagreed.

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” the court said. “If at all possible, we must interpret the act in a way that is consistent with the former, and avoids the latter.”

Many legal experts considered the challenge to Obamacare’s subsidy system a long shot. A Supreme Court ruling against the administration would have put 6.4m low and middle-income people living in states without their own exchanges at risk of losing subsidies collectively worth $1.7bn a month, according to the Kaiser Family Foundation.

It would also have triggered a mad scramble in Congress and across state legislatures to find a solution to prevent millions of vulnerable families from losing their coverage.

But there was anger among many Republicans that Justice Roberts, an appointee of President George W Bush and the judge widely credited with saving the law the first time it was before the Supreme Court, once again sided with the court’s liberal wing in upholding the law.

Justice Antonin Scalia, one of the court’s staunchest conservatives, delivered a blistering dissent, accusing his peers of “rewriting” the legislation in the administration’s favour.

“We should start calling this law SCOTUScare,” Justice Scalia said.

However, for all of Republicans’ bluster over the law, the case presented the party with a big potential headache in trying to craft a replacement for the tax credits that have emerged as one of its most popular features. Of the 34 states that lack their own marketplaces, 26 have Republican governors.

While a narrow majority of Americans still oppose Obamacare, polls show that a majority of voters would also oppose a decision to block its subsidies for low and middle income consumers.

Hillary Clinton, the frontrunner for the Democratic nomination for president and an early architect of universal heathcare, praised the court’s decision.

“I’ve fought for the promise of quality, affordable healthcare for every American for decades,” she said in a statement. “And I’m not going to stop now. Anyone seeking to lead our country should stand up and support this decision.”

Several leading Republicans, including some of the party’s most prominent presidential candidates, by contrast vowed to continue the fight against the law.

“This fatally-flawed law imposes job-killing mandates, causes spending in Washington to skyrocket by $1.7tn, raises taxes by $1tn and drives up healthcare costs,” said Jeb Bush, the former Florida governor. “As President of the United States, I would make fixing our broken healthcare system one of my top priorities.”

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