A health insurance exchange is a virtual marketplace of health insurance plans. The Affordable Care Act requires the establishment of health exchanges to offer competitive health insurance plans to individuals who either can’t obtain insurance through the workplace, are unemployed, or aren’t qualified for Medicare or Medicaid. In addition to individual health plans, small businesses can purchase a Small Business Health Options Program (SHOP) to accommodate small business employees. Each state has the option to establish a health exchange under guidelines set by the Department of Health and Human Services. If a state opts not to establish a health exchange, the Affordable Care Act (ACA) allows the state to offer its residents the use of the federally-run health exchange. Under Section 1311 of the Affordable Care Act, funding for the establishment of such health exchanges would be provided by the Federal government in the form of grants up to one year after enactment of the Affordable Care Act and no later than January 1, 2015.

The Affordable Care Act requires individuals and employers with 50 or more employees to purchase health insurance that meets minimum federal standards or incur a penalty. In King v. Burwell, the United States Supreme Court addressed the legality of providing subsidies to individuals who purchased health insurance through the federally-run exchanges. The basis of this challenge is the Affordable Care Act (ACA), which singles out state health exchanges as only being eligible for receiving such subsidies. There was a strong belief at the time the bill was drafted was that no state would opt-out of establishing a health exchange and risk the chance of denying affordable health care to those in need. After the law was implemented, more U.S. states than expected decided to opt-out, and allowances were made for those individuals from such U.S. states to purchase insurance through the federally-run exchange.

At issue is whether individuals with low income who purchase health insurance through a federally-run exchange should receive a premium tax credit which contradicts the statutory language of the ACA. The Supreme Court ultimately looked past the statutory language and focused on the intent of the law to provide affordable health care nationwide irrespective of whether one’s state established its health exchange. As a result, the Court affirmed providing subsidies to qualifying low-income individuals who utilize a federally-run health exchange. The development of health exchanges is a reform to the current health care system. The Affordable Care Act requires health insurance plans to comply with the coverage standards set by the Federal government. In line with these requirements, health insurance companies have provided health insurance plans through the health exchanges that comply with such standards. The ruling by the Court reinforces the intent of providing access to affordable health care.