Supreme Court to hear Obamacare subsidies case

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(Reuters) - The U.S. Supreme Court agreed on Friday to hear a legal challenge to a key part of the Obamacare health law which, if successful, would deprive millions of Americans of tax-credit subsidies to help them afford health insurance coverage.

In a one-sentence order, the court said it would take up a case brought by conservative challengers of the law, the most sweeping overhaul of U.S. healthcare in decades and President Barack Obama's signature domestic policy accomplishment.

The Supreme Court will issue a ruling by the end of June in the case, in which the plaintiffs have appealed a July ruling by the 4th U.S. Circuit Court of Appeals that upheld the subsidies.

At issue is whether the subsidies - a vital component of Obama's 2010 Affordable Care Act, known widely as Obamacare - should be available in all 50 states, or only in some states.

Obamacare set up health insurance exchanges and a system of subsidies to help people afford insurance premiums. The plaintiffs say the language of the law restricts subsidy availability to states that run their own insurance exchanges.

The legal question rests on a phrase in the law that authorizes subsidies for coverage purchased via an "exchange established by the state." The battle is over whether that phrase means subsidies are not available through the federally-run exchange.

If the court found the plaintiff's interpretation to be correct, the subsidies would not be available in 36 states that lack their own health insurance exchanges. In those states, the federal government runs the exchanges.

The Obama administration remains confident that Congress wanted the subsidies to be available nationwide, said White House spokesman Josh Earnest in a statement.

"This lawsuit reflects just another partisan attempt to undermine the Affordable Care Act and to strip millions of American families of tax credits that Congress intended for them to have," he said shortly after the Supreme Court took the case.

The share prices of major hospital chains HCA Holdings Inc (HCA.N), Community Health Systems Inc (CYH.N) and Tenet Healthcare Corp (THC.N) closed down more than 4 percent, while shares of health insurers UnitedHealth Group (UNH.N), Aetna Inc (AET.N) and WellPoint Inc (WLP.N) dropped nearly 3 percent.

Five million people could be affected, analysts have estimated, if the administration loses the legal fight and subsidies disappear from the federal marketplaces. In 2014, 8 million consumers signed up for healthcare via the exchanges.

LIBERTARIAN GROUP BACKS CASE

The plaintiffs in the legal challenge are business owners and individuals who object to the law. The court's decision to hear the case was welcomed by Sam Kazman, general counsel of the Competitive Enterprise Institute, a libertarian think tank that is funding the litigation.

"The need for a quick and final resolution of this question is undeniable," Kazman said in a statement.

David Cutler, a professor of applied economics at Harvard University, said on Friday that if the court throws out the subsidies, "the premiums would skyrocket and the thing would just die." He was speaking at an event at The Forum at Harvard School of Public Health in collaboration with Reuters.

The case will give the Supreme Court a second shot at reviewing Obamacare. In June 2012, the nine justices upheld by a 5-4 vote the constitutionality of Obamacare's core feature that requires people to get health insurance.

The court also ruled that the states are not required to sign on to the expansion of the Medicaid assistance program for people on low incomes that the law envisioned as mandatory.

The high court's decision to hear the subsidies availability case is somewhat surprising since there is no split among federal appeals courts on the issue.

In July, a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit struck down the subsidies, but the court later threw out that ruling and decided to rehear the case. Oral arguments in that case are scheduled for Dec. 17.

The case before the Supreme Court, expected to be argued in early March, is King v. Burwell, U.S. Supreme Court, No. 14-114.

(Reporting by Lawrence Hurley. Additional reporting by Jonathan Stempel in New, David Morgan in Boston and Caroline Humer in New York.; Editing by Chizu Nomiyama, Kevin Drawbaugh, Andre Grenon, Alden Bentley and Ken Wills)