ACA Breaking News - Cleary Insurance

The U.S. Court of Appeals for the DC Circuit has dealt a serious blow to the Obama Administration today with a decision that calls into question the structural integrity of the “pay-or-play” mandates under the Affordable Care Act (“ACA”).

Background:

The plain language of the Affordable Care Act states individuals purchasing coverage from a state exchange are eligible for the federal subsidy. The ACA, on its face, does not provide for a subsidy on the federal exchanges. The Internal Revenue Service (IRS) addressed this in May 2012 through a regulation, providing that an individual could obtain a subsidy if he or she “is enrolled in one or more qualified health plans through an Exchange.” In the same regulation, the IRS defined an exchange to include both state and federal exchanges. In other words, the IRS sought, by regulation rather than by amending the law, to clarify that the ACA provides the subsidy on both state and federal exchanges.

What Does This Mean To Employers:

This is significant to employers because one of the triggers for assessment of a penalty against an employer under the ACA is that a full-time employee has obtained subsidized coverage on an exchange. Any employer based in a state with federally-run exchanges could be free from the employer mandate ($2,000 and $3,000 penalties effective in 2015). This applies to a majority of the states across the country and could have an even greater impact on the enforceability of the ACA.

What Does This Mean for Your Planning Under the ACA:

This is far from the final word on this issue and just 2 hours later, a Richmond, VA appeals court reached the opposite decision and upheld the IRS rule stating the law covers both state and federally run exchange subsidies. The decision could be reviewed by the full DC Circuit Appellate Court, which has a majority (seven) of its active judges appointed by Democratic presidents and four appointed by Republicans. It may eventually be decided by the US Supreme Court, but that may be a long way off. There is also a chance that this could result in overdue bi-partisan discussions in Congress to address this and other ACA issues. At this point, however, it is clear that at least one high-level federal court has suggested that the entire pay–or-play approach may be in jeopardy in a majority of states.

Unfortunately for employers, it is likely that your renewal planning and implementing the benefits program in time for the start of your 2015 plan year might have to continue without clear direction if the employer mandate will be enforced if you are in a state with a federally run Exchange. The Obama administration stated it will appeal the decision and said people would continue to receive the subsidies during the appeal, which is the only way an employer would receive a penalty.

Background on the Court Decision:

In Halbig v. Burwell, the Appeals Court for the District of Columbia Circuit, sitting in Washington, DC, sided with the plaintiffs and against the Obama Administration today when it held that the ACA, by its terms, does not allow for subsidies for individual coverage in exchanges established by the federal government. This means that, at least according to this court, individuals purchasing insurance coverage on the federally-run exchanges will not be eligible for federal subsidies when they purchase insurance.

In Halbig, the plaintiffs challenged the IRS’s ability as a regulator to, in the plaintiffs’ perspective, rewrite the statute. The district court agreed with the Obama Administration, finding that the context of the ACA supported the IRS’s clarification. The appellate court disagreed, however. In a 2-1 decision, the appeals court found that there was no basis to support the contextual reading and effectively found that the IRS had exceeded its regulatory authority.

Next Steps and Webinar:

Stay tuned as more information is clarified. We are hosting several webinars over next 2 weeks due to an overwhelming request for support. Register at the link below and state your date/time preference:

The webinar will last 1 hour and we will take any questions/requests prior to and throughout the presentations. If there are additional topics you’d like to see, please let us know and we’ll accommodate your request as much as possible. The presentation will cover the following information:

Who is subject to the employer mandate in 2015?
How do you measure your variable hour employees to determine if they are required to be offered coverage to avoid penalties in 2015?
How do you avoid any litigation pitfalls inherent with ACA implementation?
What are the next steps to ensure compliance?
How might the latest court ruling affect me?

If you prefer to receive our written guidebook in lieu of the webinar, please contact us for a copy. If you have any questions on your current program, please contact us at your earliest convenience.