On June 25, the Supreme Court upheld the availability of subsidies in all 50 states under the Patient Protection and Affordable Care Act. The court affirmed in a 6–3 vote that the language in PPACA allows the government to help people buy insurance (through subsidies or tax credits) anywhere in the country and not only in states that have established their own insurance exchanges. Chief Justice John Roberts wrote for the majority. Justices Scalia, Thomas and Alito dissented.
The court cited examples in the PPACA of “inartful drafting” and found “relevant provisions to be ambiguous.” The court further explained that the tax credits were necessary for the federal exchanges to function like state exchanges to avoid “the type of calamitous result that Congress plainly meant to avoid.” Justice Scalia wrote in his sharp dissent to the decision that “words no longer have meaning if an exchange that is not established by a state is ‘established by the State.’”
The King v. Burwell ruling is the second case where the Supreme Court has decided in favor of the PPACA, allowing millions of qualified individuals to keep the tax subsidies that help them afford to purchase health insurance coverage on a state or federal exchange.
There was much speculation that if the decision had gone the other way, the PPACA would have been severely crippled. Health policy analysts projected that Individuals who receive these subsidies would struggle to afford insurance without that financial support. This could have resulted in healthy people withdrawing from the exchanges, causing rising premiums and making the insurance unaffordable to people without employer-sponsored insurance coverage.
While there are still legal challenges to PPACA, many experts predict fewer challenges to the law for now.
What this decision means for employers
With this ruling and the subsidies remaining intact, nothing changes as the provisions of PPACA continue to be implemented. All of the existing provisions of PPACA remain in place, including:
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Employer mandate: The employer shared responsibility provisions of PPACA, often called “play or pay,” are still in force. Employers must ensure that their administrative measures are in place to track and measure compliance with the mandate in order to avoid the penalties that may be triggered when employees seek subsidized coverage through a government exchange. Subsidies generally are not available for employees who are eligible for employer-sponsored coverage, if the coverage offered meets certain affordability and minimum value thresholds.
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Information reporting: Applicable large employers and self-funded small employers must continue to prepare for the extensive reporting requirements under Internal Revenue Code sections 6055 and 6056 and ensure that they are capturing all of the data required to complete the IRS Forms 1094 and 1095 for 2015.
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Excise tax (Cadillac tax): Although the attempts to repeal this unpopular provision of PPACA continue, employers should begin to work with their brokers to analyze the potential impact of the 40 percent excise tax on high-cost plans that is scheduled to take effect in 2018.
The court’s ruling maintains the status quo, so it is back to the business of maintaining high value, affordable, and administratively manageable employee health benefits programs for employers.
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