Why did the Supreme Court uphold tax credits for insurance bought through the federal exchange in King v. Burwell?

In King v. Burwell, the Supreme Court upheld the availability of tax credits for insurance purchased through the federal exchange by rejecting a narrow, literal interpretation of the Patient Protection and Affordable Care Act (ACA) that would have restricted subsidies only to state-run exchanges.1

While the plaintiffs argued that the phrase "Exchange established by the State" explicitly excluded federal exchanges, the Court determined that this language was ambiguous within the broader context of the law. Rather than relying on administrative deference, the Court reasoned that the statutory scheme compelled a broader interpretation to avoid destabilizing the individual insurance market.1

The Court concluded that adopting the plaintiffs' narrow reading would have triggered "death spirals"—a cycle where rising premiums lead to fewer healthy participants, further increasing costs—which Congress specifically designed the ACA to prevent. By affirming the IRS's authority to issue credits on federal exchanges, the Court preserved the viability of the law’s integrated system of mandates and subsidies, ensuring that millions of Americans could maintain affordable health insurance.12