On June 29, 2012, the Supreme Court rules, in a 5-4 vote, that the law’s mandate requiring Americans to carry health insurance or pay a penalty is valid under Congress’s constitutional authority to levy taxes. (See this Wall Street Journal article. )In other words, forcing Americans to either buy insurance with an inflated premium or pay a penalty is a tax. The tax is either explicit in the penalty you would pay the IRS, or included in the premium you pay (unless you receive a subsidy). If you do not get a subsidy, then you pay a premium that includes 2 components: covering your own insurance and a tax to subsidize others.
Here’s what CNN reported:
The mandate “looks like a tax in many respects,” Roberts wrote. The money is to be paid by people when they file their tax returns and does not apply to those who pay no federal income taxes; the amount someone owes “is determined by such familiar factors as taxable income, number of dependents, and joint filing status,” and the “requirement to pay is found in the Internal Revenue Code and enforced by the IRS.” The high court overturned a unanimous decision by the 11th U.S. Circuit Court of Appeals that the mandate did not impose a tax.
Then, the Supreme Court ruled 6-3 on June 25, 2015, that subsidies were also legal. The IRS will be able to issue subsidies on behalf of those who bought a plan through HealthCare.Gov after the plaintiffs in King V. Burwell lost their challenge. See this Washington Post article.
The net effect of these rules is that the ACA is allowed to set up a system that results in some people paying high premiums in order to subsidize others who the government determines cannot afford to buy insurance on their own. As the Supreme Court ruled, it is a tax on people who earn more than $47,000 per year to pay subsidizes to those who earn less than that.
Intriguingly, nowhere in this system is anything that will actually make healthcare itself more affordable. It merely addresses the insurance. That does not mean that most people can afford to pay the co-pays, meet the deductibles and pay the out-of-pocket costs of actually getting medical care.