ACA: Post King v. Burwell Landscape
Section 36B of the Internal Revenue Code, which was enacted as part of the Patient Protection and Affordable Care Act (ACA), authorizes subsidies for health insurance coverage that is purchased through an “exchange established by the State” under the ACA. The Internal Revenue Service (IRS) issued regulations that interpreted Code Section 36B to allow credits for insurance purchased on either a State or federally-established exchange.
For additional background see Pending Supreme Court Ruling on Tax Credits. In its June 25, 2015 Opinion, the Supreme Court ruled that the tax credits are allowed for insurance purchased on either a State or federally established exchange. For highlights of the Opinion see SCOTUS Opinion on King v. Burwell.
This Article identifies some of the continuing legal challenges to the ACA and identifies actions that employers should consider regardless of pending litigation or possible legislative action.
Ongoing Legal Challenges to the ACA
U.S. House of Representatives v. Burwell, Case No. 14-cv-01967, in the U.S. District Court for the District of Columbia, is a claim by the House of Representatives that the administration usurped the spending power of the House by dispensing cost-sharing subsidies to the insurance companies providing coverage on the exchanges. Estimates of the subsidies range from $135-175 billion over a decade. This is still at the trial court level where the judge is determining whether the House has standing to bring the case.
Various Contraception Mandate Challenges are pending. These cases challenge the administration’s accommodation that allows certain religious employers to opt out of providing insurance that covers birth control. The organizations argue that although they do not pay for the contraception coverage, the opt-out triggers the coverage to which the organizations object.
Watch for developments in Zubik v. Burwell (Case Number 14A1065 in the U.S. Supreme Court). On June 29, 2015, the Supreme Court rejected the requests by Roman Catholic colleges and other charities in Pennsylvania to continue a hold on the Third Circuit Court of Appeals ruling that the opt out does not trigger coverage, holding instead, the ACA triggers the coverage. The Supreme Court Order allows the Third Circuit’s decision to go into effect, but it allows the religious groups to provide notice to the Department of Health and Human Services that they desire and are entitled to a religious exemption and if such notice is made, the government may not enforce the mandate directly against them, at least during the period the Supreme Court is deciding whether to review the case. At the same time, women who would otherwise be denied access to birth control will have access, at no cost to them, of birth control methods and devices approved by the U.S. Food and Drug Administration. The government will reimburse the cost. The order makes clear that the Justices are not ruling on the correctness of the Third Circuit decision. That will be the issue if the Court grants review of the case.
Coons v. Lew (Case Number 14525 in the U.S. Supreme Court) challenged the creation of the Independent Payment Advisor Board (IPAB) as an unconstitutional delegation of congressional authority. IPAB is supposed to be the fifteen (15) member panel of health care experts appointed to make cost-cutting recommendations in Medicare if program spending exceeds a certain target growth rate. The lower courts rejected the case as not being ripe for litigation because the President has not yet appointed anyone to serve on the panel and there were no recommendations regarding Medicare. Watch this issue develop in the 2016 Presidential campaign and as Medicare insolvency gets closer (2030?).
Cadillac Tax. This is scheduled to take effect in 2018 and is a nondeductible tax equal to forty percent (40%) of the cost of health coverage that exceeds certain threshold amounts: $11,850 for individual coverage and $30,950 for family coverage. For insured plans, the employer calculates the tax and the insurer pays the tax; for self-insured plans, the employer calculates and pays the tax. Do not be fooled by the “insurer pays” reference. This will pass through to the employer and employees. Planning to avoid or reduce the exposure should begin now to allow phase-in of high deductible or other arrangements before 2018.
Reporting. Employers must comply with the reporting obligations that begin in January 2016. See FAQ’s On Reporting Employer-Provided Health Insurance Offer and Coverage.
Pre-Medicare (65) Retirees. Because individuals are eligible for a premium subsidy in all of the States, not just those with State exchanges, review practices regarding health coverage for those employees retiring before age sixty-five (65) and Medicare eligibility. It may be more economical to make a cash payment in lieu of insurance and allow the retiree to purchase coverage on an exchange.
Small Is Good. By avoiding applicable large employer status, those employers with less than fifty (50) full-time employees avoid the shared responsibility and the employer information reporting provisions for offers of minimum essential coverage. In addition, since coverage and subsidies are available on the exchanges in all States, some additional compensation may be a lower cost and administratively friendlier alternative to employer sponsored insurance. Counting heads and hours may be beneficial.
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