The Supreme Court handed down its verdict on the "King v. Burwell" case on Thursday, June 25, with a 6-3 verdict in favor of taking a "vague" view of the language in the PPACA. In specific, the Supreme Court ruled that the Affordable Care Act may provide nationwide tax subsidies designed to help certain poor and middle-class people purchase health insurance.
The law, as originally written, stated that certain individuals would be eligible for subsidies specifically in states that had their own insurance exchanges. However, it turns out, the majority of states did not set up their own exchanges, but rather deferred to the Federal exchange. And, there was nothing in the PPACA law that said these subsidies would also be available to individuals in states that were relying on the Federal exchange.
However, in writing the majority opinion, Chief Justice John G. Roberts, Jr., wrote that the words in question "an exchange established by the state" must be understood as part of a larger statutory plan. "In this instance, the context and structure of the act compels us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase."
Recommended For You
If the plaintiffs had won, the employer mandate would be void in the states utilizing the Federal exchange, because employers could not be penalized if their workers went to the exchanges for insurance. In other words, no exchange subsidies would mean no employer mandate penalties. In sum, employers in the states that did not set up their own exchanges would be exempt from the employer mandate, because no federal outlays would be made to trigger the penalty.
Had this turned out to be the case, the American Action Forum, a think tank, estimated that 262,000 businesses in the 34 states affected by the Supreme Court decision would be liberated from the employer mandate. This, in turn, would offer the opportunity for more hours for up to 3.3 million part-time workers, allow the creation of up to 237,000 new jobs, bring 1,270,000 more people into the labor force, and increase pay by up to $940 per worker and up to $13.6 billion overall.
Response to the Supreme Court decision by small business and its supporters has been uniformly negative.
For example, "The law suffers from many ill-considered and poorly-drafted provisions that negatively impact franchise small business owner and the millions of workers they employ," said Steve Caldeira, president and CEO of the International Franchise Association (IFA), in a June 25 press release. The IFA also called on Congress to pass legislation to ease the regulatory burdens placed on franchise small business owners by the law and help the implementation of the provisions of the ACA employer mandate.
Small business supporters in individual states also voiced their concerns. Example: "Small business in Wisconsin remains deeply disappointed in the Affordable Care Act," said Bill G. Smith, Wisconsin State Director of the National Federation of Independent Business. "The central defect in the law is that it was never designed to make health insurance more affordable for everyone, as its supporters, including the President, promised. It was designed to subsidize health insurance for some Americans at the expense of others."
The U.S. Chamber of Commerce weighed in on the decision by highlighting a number of problems that small businesses will now need to address:
1 – "Employers still have a perverse incentive to hire part-time workers over full-time ones. A University of California-Berkeley study found that 2.3 million workers are at risk of having their hours cut."
2 – "The medical device tax continues to punish companies, forcing them to reduce investments and hiring, and making them less globally competitive."
3 – "A $189 billion tax on health plans, the Health Insurance Tax, in effect since 2014, is hurting small businesses that buy insurance on the fully-insured market. The National Federation of Independent Business estimates that the tax will cost up to 286,000 jobs."
4 – "Small businesses are about to get hit with fewer health plan choices and higher costs, because Washington will expand the small-group market in 2016." (Note: In specific, the small group market will be expanded from employers with under 50 employees to also include those with 51 to 100 employees. "Instead of providing stability, expanding the definition will force those historically defined 'large group plans' with 50 to 100 employees into the 'small group market,' where they will suffer higher premiums, less flexibility, and new barriers to coverage," said Katie Mahoney, executive director of health care policy for the U.S. Chamber of Commerce.)
5 – "The 40 percent excise ('Cadillac') tax on high-value health plans is still on track to hit millions of workers and employers in a few years. The tax, opposed by both unions and business groups, is designed to eventually hit every health plan."
And, as a result of the decision, small business owners will be required to engage in a lot more work, at the cost of a great deal of time and resources. While the decision was not entirely unexpected, according to Joy Napier-Joyce, leader of the benefits practice at the law firm of Jackson Lewis, "It means that employers must continue the difficult tasks of determining who is considered a 'full-time' employee; analyzing the penalty risk for those who are not offered minimum essential, affordable, and minimum value coverage; as well as preparing for complicated IRS reporting requirements."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
