The government appealed the decision to the Tenth Circuit, and in November 2014, the appeal was placed in abeyance pending the Supreme Court's decision in King. Oklahoma requested that the Supreme Court take up the Pruitt case before appellate judgment so that the Pruitt plaintiffs can present their own arguments alongside the King plaintiffs. The government responded that the Supreme Court should not hear the Oklahoma case, stating that the states could proceed as amici curiae in the King case and that granting the Oklahoma case would raise additional jurisdictional concerns not presented in the King case. The Supreme Court denied certiorari before judgment on January 26, 2015.:7
In Indiana v. IRS the state of Indiana and multiple Indiana school districts are suing the IRS claiming that the employer mandate should not apply to schools or local governments. The IRS argued that the plaintiffs did not have standing to sue, but that argument was rejected and Judge William T. Lawrence in the U.S. District Court for the Southern District of Indiana ruled that the case could proceed. Oral arguments occurred in October 2014 but a ruling has not been issued.
On June 25, 2015, the Supreme Court issued its ruling, written by Chief Justice Roberts, and joined by Justices Kennedy, Breyer, Ginsburg, Sotomayor, and Kagan, rejecting the challenge to the act. The Court noted that previous attempts to reform health care insurance "encouraged people to wait until they got sick to buy insurance" resulting in "an economic 'death spiral': premiums rose, the number of people buying insurance declined, and insurers left the market entirely."
It further noted that in 2006 "Massachusetts discovered a way to make the guaranteed issue and community rating requirements work—by requiring individuals to buy insurance and by providing tax credits to certain individuals to make insurance more affordable." and that "the Affordable Care Act adopts a version of the three key reforms th
It further noted that in 2006 "Massachusetts discovered a way to make the guaranteed issue and community rating requirements work—by requiring individuals to buy insurance and by providing tax credits to certain individuals to make insurance more affordable." and that "the Affordable Care Act adopts a version of the three key reforms that made the Massachusetts system successful."
The Court found that the Chevron test "does not provide the appropriate framework here." and also rejected the Court of Appeals approach of deferring to the IRS: "The tax credits are one of the Act’s key reforms and whether they are available on Federal Exchanges is a question of deep 'economic and political significance'; had Congress wished to assign that question to an agency, it surely would have done so expressly. And it is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort." It concluded that it is "the Court's task to determine the correct reading of Section 36B."
Citing FDA v. Brown & Williamson Tobacco Corp, the Court noted that "when deciding whether the language is plain, the Court must read the words 'in their context and with a view to their place in the overall statutory scheme.'"
When read in context, the phrase "an Exchange established by the State under [42 U. S. C. §18031]" is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it could also refer to all Exchanges—both State and Federal—for purposes of the tax credits. If a State chooses not to follow the directive in Section 18031 to establish an Exchange, the Act tells the Secretary of Health and Human Services to establish "such Exchange." §18041. And by using the words "such Exchange," the Act indicates that State and Federal Exchanges should be the same. But State and Federal Exchanges would differ in a fundamental way if tax credits were available only on State Exchanges—one type of Exchange would help make insurance more affordable by providing billions of dollars to the States' citizens; the other type of Exchange would not.
Having found the text ambiguous, the Court, citing United Sav. Assn. of Tex. v. Timbers of Inwood Forest Associates, (an opinion written by Justice Scalia) looked "to the broader structure of the Act to determine whether one of Section 36B's 'permissible meanings produces a substantive effect that is compatible with the rest of the law.'" It rejected petitioners' interpretation "because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very 'death spirals' that Congress designed the Act to avoid." The Court observed that the petitioners' interpretation would make the ACA "operate quite differently in a State with a Federal Exchange. As they see it, one of the Act's three major reforms—the tax credits—would not apply. And a second major reform—the coverage requirement—would not apply in a meaningful way...[W]ithout the tax credits, the coverage requirement would apply to fewer individuals. And it would be a lot fewer...If petitioners are right, therefore, only one of the Act's three major reforms would apply in States with a Federal Exchange." Here, the statutory scheme compels us to reject petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very “death spirals” that Congress designed the Act to avoid.
Unlike the Fourth Circuit, the Court chose not to rely on the IRS interpretation, noting the “economic and political significance” of the question and the IRS's lack of expertise in health insurance policy. By choosing instead to resolve the ambiguous language of the statute by looking at the purpose of the statute as a whole rather than by applying the Chevron doctrine, the Court's decision precludes the possibility of the IRS reversing in the future its decision to have subsidies available on the federally run exchange.
In a dissent joined by Justices Thomas and Alito, Justice Scalia wrote: "The Court holds that when the Patient Protection and Affordable Care Act says 'Exchange established by the State it means 'Exchange established by the State or the Federal Government.' That is of course quite absurd, and the Court’s 21 pages of explanation make it no less so." He then ridiculed the decision, saying that the Affordable Care Act should be called "SCOTUScare."
Scalia further noted that the rest of the ACA carefully distinguishes between exchanges established by states and those established by the federal government through Health and Human Services. Scalia cited differences between where the document identifies how the different exchanges receive funding,
Scalia further noted that the rest of the ACA carefully distinguishes between exchanges established by states and those established by the federal government through Health and Human Services. Scalia cited differences between where the document identifies how the different exchanges receive funding, authority, and names. Scalia used this to argue that the context of the law does not allow for the phrase "established by the state" to mean "established by the state and federal government." He reminds the reader that the purpose of looking at the context of phrases is for "understanding the terms of the law, not [to make] an excuse for rewriting them."
Later, Scalia also pointed out that interpreting the phrase "by the State" as "by the state and federal government" not only eliminates all meaning from the first phrase, but causes problems of interpretation elsewhere in the ACA. "The State" is identified distinctly in the ACA with regards to the formula for calculating tax credits, for screening children for tax credit eligibility, for using a "secure electronic interface" for tax credit screening, for other agencies, for directions on operating web sites, and for guidelines around the enrollment of children. Of this, Scalia mentioned that "[i]t is bad enough for a court to cross out 'by the State' once. But seven times?"
The extensive use of the term "by the State" also contrasts against the more extensive use of more general terms. "Clause after clause of the law uses a more general term such as 'Exchange.'" Scalia pointed out that the court should defer to the specific meaning of this term, and that assuming that the "by the State" term is general does not fit appropriate rules of interpretation. Scalia also notes that the ACA knows how to equate unlike terms explicitly, as it declared that "[a] territory that...establishes...an Exchange...shall be treated as a State." The ACA does not have such an equivalency clause for exchanges established by the federal government.