Even if the government loses, King wouldn’t call into question the validity of tax credit payments made before June 2015, when the Supreme Court is likely to decide King. Under 26 U.S.C. §7805(b)(8), the IRS has the power to “prescribe the extent, if any, to which any ruling (including any judicial decision …) relating to the internal revenue laws shall be applied without retroactive effect.” In plain English, that means the IRS need not claw back tax credits that were paid out before the Court’s decision.
But what happens after June? Unless the Supreme Court stays its decision, the IRS would have to abruptly stop issuing advance tax credits. The effects would be felt almost immediately: 4.5 million people would see their insurance rates surge; many of them would drop coverage; and insurers’ risk pools would skew toward the unhealthy, leading to enormous losses. In a word, there would be chaos on Healthcare.gov.