What did the phrase “Exchange established by the State” mean in the dispute in King v. Burwell?

In the legal dispute King v. Burwell, the phrase “Exchange established by the State” became the focal point of a conflict over the interpretation of the Patient Protection and Affordable Care Act (ACA).1

The plaintiffs argued that this specific language meant that federal tax credit subsidies were available only to consumers who purchased health insurance through marketplaces created by individual states. Under this narrow reading, the Internal Revenue Service would lack the authority to issue subsidies to those using the federal exchange.1

Conversely, the government argued that the federal exchange functioned as a stand-in for state exchanges in jurisdictions that did not establish their own, effectively counting as an “Exchange established by the State” within the context of the law’s broader purpose.1

Ultimately, the Supreme Court of the United States ruled that while the phrase was ambiguous, the plaintiffs' interpretation would destabilize the insurance market and trigger a "death spiral" that Congress intended to avoid. The Court affirmed that subsidies were permissible on both state and federal exchanges to ensure the viability of the ACA’s health-insurance financing system.12