What the Supreme Court's Obamacare ruling means for your finances

The Supreme Court rules that U.S. tax subsidies are legal for all health insurance exchanges

By Liz Skinner

Jun 26, 2015 @ 12:01 am EST

In the first of two U.S. Supreme Court decisions with significant financial planning implications, the high court preserved the core of President Barack Obama's health care law on Thursday.

The justices ruled 6-3 that individuals who have been receiving federal subsidies are due those tax breaks no matter whether they purchased health insurance from state or federal online exchanges.

“Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” Chief Justice John Roberts wrote.

He and Justice Anthony Kennedy joined the court's four Democratic appointees in deciding that Obamacare allows those who buy health benefits through the federal exchange to qualify for tax credits, instead of just allowing those in the 16 states that provide their own exchanges to qualify, as a sentence in the law seemed to indicate.

“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,” the majority opinion said.

Health insurance decisions have become more complex in recent years under the Affordable Care Act, which was signed into law five years ago.

Whether investors work with a financial adviser or handle their finances themselves, they need to do income planning for tax credits; it can save them thousands of dollars and provide great value.

About 6.3 million people would become uninsured if they lost the tax credits that help cover premiums for health care bought through the federal exchange, according to an analysis by the Urban Institute.

Millions more who buy insurance without receiving the subsidies also could have been hit with a surge in prices if the pool of those buying insurance through the exchange had shrunk. A RAND Institute report found insurance premiums in the individual health insurance market could have risen by an average of 47% if the justices had not upheld the subsidies.

Some experts also believed equities in the health care sector could have been depressed, at least temporarily, if the decision had gone the other way.


On Friday, the nation's highest court issued a decision in another case that effectively made same-sex marriage legal in every state.

Since the Supreme Court threw out same-sex marriage bans in Michigan and three other states, Social Security and other planning for gay couples now comes much closer to that of married heterosexuals. Gay spouses are now afforded the federal benefits that come with a recognized union, such as those related to estates and income and other taxes.

All but 13 states have approved same-sex marriage in the two years since the Supreme Court largely proclaimed the Defense of Marriage Act unconstitutional.

Jennifer Hatch, president and managing partner with Christopher Street Financial, an advisory firm focused on the lesbian, gay, bisexual and transgender market, said even though the court threw out the gay marriage bans, there will likely be a few remaining challenges, such as adoption rights.

Previously, the high court created big news for participants in retirement plans in May when it issued a ruling in a 401(k) excessive fee lawsuit. The Supreme Court's order in that case will require retirement plan advisers to keep a close eye on their fund lineups and review their contracts with plan sponsors, among other details covered by the Employee Retirement Income Security Act of 1974.

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