"The Supreme Court upheld the pivotal piece of the Affordable Care Act (ACA) that allows this legislation to claim to fulfill universal health insurance coverage for all Americans: the tax credits."
"The Supreme Court upheld the pivotal piece of the Affordable Care Act (ACA) that allows this legislation to claim to fulfill universal health insurance coverage for all Americans: the tax credits.
In King vs Burwell, Chief Justice Roberts, writing for a 6–3 majority, held that middle- and low-income individuals are entitled to the same tax credits whether the health care exchange is run by the state or the federal government.
So what does that mean for employers?
Forge ahead in complying with current and upcoming ACA requirements.
To review, the ACA introduced three key health care reforms intended to achieve universal health insurance coverage for over 40 million uninsured Americans:
1) guaranteed issue and community rating requirements bar insurers from either charging a higher premium or denying coverage based on a person's health.
2) individuals must maintain health insurance coverage or pay a penalty to the Internal Revenue Service (IRS), with an exemption if available insurance premiums exceed 8 percent of their income.
3) Federal and state health insurance marketplace exchanges were established where individuals can shop for insurance, qualifying for tax credits if their household income is between 100 percent and 400 percent of the federal poverty line.
King vs Burwell was an effort by those wanting to repeal the ACA, or at least remove the tax credits, and hinged on wording in the law that stated tax credits are available through an "exchange established by the state." The federal exchange is a default if a state chose not to set up an exchange. The Supreme Court ruled that in the spirit and intention of the law, tax credits are available through both state and federal exchanges, even though the word "federal" was not present in the challenged sentence in the law.
The IRS had issued a regulation with this interpretation back in 2012, stating that the tax credits are available to individuals regardless of whether it is a state or federal exchange.
Large employers were watching King vs Burwell with interest. If the plaintiffs had prevailed in whole or part, it would have meant that the ACA would either be repealed or the tax credits provided through the federal exchange could have been removed. Tied into the availability of tax credits is the employer mandate—which became
effective in 2015 for employers with 100 or more employers (the upcoming deadline for employers with 50 to 99 employees is January 2016).
The ACA's employer mandate requires employers with 50 or more full-time employees to provide adequate coverage to their full-time employees or pay a significant penalty. If a full-time employee either is not offered coverage by their employer or is offered coverage that is not affordable and/or does not meet minimum ACA value requirements causing that employee to purchase coverage and qualify for a tax credit through an exchange, the employer is subject to the penalty.
If the plaintiffs had won and, at a minimum, the federal tax credits had been removed, that would have left only 16 states, plus the District of Columbia, with state-run exchanges where the employer mandate could be enforced and employers penalized for not providing ACA-approved health coverage to their employees. Employers in the remaining 34 states which chose not to set up a state exchange would have been off the hook.
It's all about context and intent. The Supreme Court's majority noted that the challenged phrase's meaning may seem plain "when viewed in isolation," but concluded this interpretation is "untenable in light of the [ACA] as a whole." The Court acknowledged that repealing the tax credits would destroy rather than improve health insurance coverage in America, voiding Congress' intent in passing the ACA.
"Keep your eye on your company's reason for being, and the employees, including yourself, who make that happen -- and it will all be fine."
With the ACA remaining intact, employers need to review their obligations:
These are just some of the tough decisions you face in morphing your plan design, and your challenge is to not lose sight of your unique reasons why, other than the ACA requirements, offering your employees health benefits ever made sense for your company in the first place.
Then there's the record-keeping. Compliance is one thing, demonstrating compliance in an audit is quite another. Document all of your plan design decisions to prove:
-your benefit plans comply with the market reforms already in effect under the ACA, such as the elimination of pre-existing condition exclusions, elimination of lifetime and annual caps on essential health benefits, and
coverage of children up to the age of 26.
-your plan's eligibility language is consistent with the employer's reporting of coverage to the IRS and its compliance with the employer shared responsibility provision requirements. For more information, click here.
We have faith that if you keep your eye on your company's reason for being, and the employees, including yourself, who make that happen -- it will all be fine.
Source: "Supreme Court Rejects Latest Challenge to Affordable Care Act: What Are Employers' Obligations Going Forward?" Mondaq Report, 6/29/15, by Amy M. Gordon, Michael T. Graham, Jacob Mattinson, Susan M. Nash and Jamie A. Weyeneth McDermott Will & Emery;
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