The United States Supreme Court has upheld a key part of President Barack Obama's healthcare law, allowing premium tax credits granted through both state and federal health insurance exchanges.

    Within the Affordable Care Act (ACA) premium tax credits are designed to defray the cost of purchasing health insurance and, in May 2012, the Internal Revenue Service (IRS) issued a final rule for their implementation.

    However, while the legislation specifies that the tax credits are only available to individuals who purchase health insurance through an exchange established by a state, the IRS interpreted the law as authorizing the agency to grant tax credits also to individuals who purchase insurance on a federally facilitated exchange.

    If that IRS interpretation were to have come unstuck and the SCOTUS had outlawed premium tax credits on federal exchanges, it would have had a significant impact on Obamacare. With only a small minority of states running their own exchanges, those obtaining insurance from the 36 federally run exchanges in the remainder of the United States could have been cut off from tax credit assistance.

    Therefore, the Court's June 25 ruling in King v. Burwell (No. 14-114) will come as a major relief for the Administration. It ruled, by a 6-3 majority, that the ACA, read as a whole, makes tax credits available for individuals on both types of exchanges.

    Chief Justice John Roberts, who wrote the majority opinion, pointed out that the ACA "contains more than a few examples of inartful drafting," but that "the words of a statute must be read in their context and with a view to their place in the overall statutory scheme."

    "Several other provisions in the Act would make little sense if tax credits were not available on Federal Exchanges," the opinion added. "Given that the text is ambiguous, the Court must look to the broader structure of the Act."

    It was decided that, while "the Petitioners' plain-meaning arguments are strong, the Act's context and structure compel the conclusion that [it] allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid."

    However, the dissenting opinion led by Justice Antonin Scalia was scathing in its attack on the majority's decision, stating that the SCOTUS has made an "absurd" decision that "when the ACA says 'Exchange established by the State' it means 'Exchange established by the State or the Federal Government.'"

    Scalia noted that the term "Exchange established by the State" appears seven times in the Act, and asked "what are the odds, do you think, that the same slip of the pen occurred in seven separate places? No provision of the Act – none at all – contradicts the limitation of tax credits to State Exchanges."

    He concluded that, "rather than rewriting the law under the pretense of interpreting it, the Court should have left it to Congress to decide what to do about the Act's limitation of tax credits to State Exchanges," and that, following the rewriting of the law to make tax credits available in both types of exchange, "we should start calling this law SCOTUScare."