How Big Are the Subsidies in King v. Burwell?

March 4, 2015

The Supreme Court will today hear arguments in King v. Burwell, a case concerning the insurance premium subsidies in the Affordable Care Act.

The plaintiffs’ argument is that the health care law does not allow the federal government to provide these subsidies in states that failed to set up their own exchanges. This argument is based on the text of the law referring to exchanges “established by the state,” in apparent contrast with the one established by the federal government. In addition to this textual basis, those siding with the plaintiffs have pointed to remarks by Jonathan Gruber, an economist who helped design the law, in which he implied the subsidies were designed as an incentive for states to set up their own exchanges.

Solicitor General Donald Verrilli Jr. will argue on behalf of the federal government that the subsidies were designed for all consumers on individual exchanges, including those established by the federal government. The Affordable Care Act was an attempt to move towards universal coverage, and limiting the subsidies would not make sense in that light.

I’m not a legal scholar and I can’t say how the Supreme Court will rule. What I can tell you about, though, is how these subsidies look as a budget item. They’re not a big one now, but they will be:

By the Joint Committee on Taxation’s most recent estimates, the subsidies were only $15.5 billion, total, in 2014, the first year of their existence. (Most people haven’t even filed their individual taxes for 2014 or determined exactly the final amount.) However, the Committee has that number fast increasing to over $100 billion before the end of the decade. That would make these subsidies the largest refundable tax credit ever.

Despite six long years of argument over the Affordable Care Act, the legislation is actually still in its infancy. The arguments in King v. Burwell are less about what exists now than they are about what is to come.

This blog post also appears on our Forbes contributor page.

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