U.S. Supreme Court Rules in Favor of Administration – What This Means for AHCA-NCAL Members
The following is courtesy of AHCA June 25, 2015 Member Update.
U.S. Supreme Court Decision
Today, the U.S. Supreme Court (SCOTUS) released its decision in King v. Burwell, finding in favor of the Obama Administration. This decision upholds the Internal Revenue Service (IRS) Affordable Care Act (ACA)-related rule that extends tax-credit subsidies to individuals who purchase insurance through either a state- or federally-run exchange. In a 6-3 decision, the majority agreed that the ACA’s statutory language regarding when tax credits are available is ambiguous, but when read in the context of the entire statutory scheme, Congress clearly intended to provide subsidies for both state-run and federally-run exchanges. SCOTUS said the ACA language “compels the Court to reject [challengers’] interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid.”
On July 22, 2014, two federal courts of appeal issued conflicting decisions regarding the availability of subsidies for individuals who purchase health insurance on federally-run exchanges. A three-member panel of the DC Circuit Court of Appeals held that subsidies are only available for insurance purchased through a state-run exchange (not a federally-run exchange), thus invalidating the IRS rule that authorizes the subsidies for insurance purchased on a federally-run exchange (Halbig v. Burwell ). A few hours later, a three-member panel of the Fourth Circuit Court of Appeals reached the opposite conclusion and held that subsidies are available to all individuals who purchase insurance from exchanges regardless of whether or not those exchanges are established by the federal government (as in most states) or by an individual state (King v. Burwell).
On November 7, 2014, SCOTUS agreed to hear King v. Burwell . On March 4, 2015, SCOTUS heard oral arguments. The challengers, David King and three other Virginia residents, argued that the ACA’s statutory language only allows for insurance subsidies (i.e., financial assistance from the government to help moderate- and low-income individuals pay for health insurance) in state-run exchanges — not in federally-run exchanges. The federal government argued that the ACA, as a whole, is clear that subsidies should be available to all individuals enrolling in any exchange — whether established by the state or federal government.
What the Decision Means
The SCOTUS ruling is a clear signal that the ACA is here to stay, at least for now. In other words, it is “business as usual” in all exchanges, whether those exchanges are state- or federally-run. Currently, 34 states rely on federally-run marketplaces. Another 13, plus Washington, D.C., have their own state-run exchanges, and three others have state marketplaces but use HealthCare.gov to determine subsidy eligibility. The Court’s decision clarifies that subsidies will continue to be available to any individual who purchases insurance through any exchange (state-run or federally-run), and earns between 100-400 percent of the federal poverty level. That means those individuals who previously had tax-credit subsidies in federal-run exchanges will keep those subsidies to the extent that they continue to satisfy the subsidy requirements. Those same individuals also will stay insured.
AHCA will monitor the reaction on Capitol Hill on both sides of the aisle, and we will keep membership apprised.
AHCA/NCAL members must continue to comply generally with the ACA requirements. As of January 1, 2015, all employers with at least 50 full time employees or a combination of full-time and part-time employees totaling 50 are required to comply with the Employer Shared Responsibility provisions found in the Internal Revenue Code, Section 4980H . If employers do not offer affordable health coverage that provides a minimum level of coverage to full-time employees (and their dependents), the employer may be subject to an Employer Shared Responsibility payment (e.g., a penalty). Important requirements and dates for penalty implementation include:
- All large employers (50+ full-time equivalent employees) must offer affordable, minimum value health coverage to at least 70% of full-time employees and their dependent children up to age 26 to avoid a $2,000 penalty per employee; a $3,000 penalty may still apply for each uncovered full-time employee who receives a subsidy
- No penalties for employers who meet certain criteria with 50-99 full-time equivalent employees
- For employers with 100 or more full-time equivalent employees, if no health coverage is offered (or if minimum value coverage is not offered to at least 70% of full-time employees) and at least one employee obtains a premium tax credit through an exchange, a $2,000 penalty per employee applies after the first 80 full-time employees
- Generally, no penalties for employers between January and the Plan Year start for certain non-calendar year plans
- Employers with 50 or more full-time equivalent employees must offer affordable, minimum value coverage to at least 95% of full-time employees and their dependent children up to age 26 to avoid penalties; a $3,000 penalty may still apply for each uncovered full-time employee who receives a subsidy
- For employers with 50 or more full-time equivalent employees, if no insurance is offered (or if minimum value coverage not offered to at least 95% of full-time employees) and at least one employee obtains a premium tax credit through an exchange a $2,000 penalty per employee applies after the first 30 full-time employees
- Small Business Health Option Program (SHOP) exchange open to all employers with fewer than 100 employees
- Information Return for 2015 filed with IRS and distributed to employees
- SHOP coverage open to all small and large employers
Stay tuned to AHCA’s ACA website for more information. Please contact Dianne De La Mare at email@example.com with any questions.