One thing for employers to watch this week is…
On July 22, 2014 two different federal courts came out on opposite sides of the same question. In the morning, the U.S. Court of Appeals for the DC Circuit hit the Obama Administration with a decision that called into question the structural integrity of the “pay-or-play” mandates under the Affordable Care Act (“ACA”). Later in the day, the U.S. Court of Appeals for the Fourth Circuit, sitting down the road in Richmond, came out on the other side of the question.
The Appeals Court came out and stated that based on the terms of the ACA, it does not allow for subsidies for individuals in exchanges established by the federal government. So what that means is that according to the Appeals Court, for individuals that are purchasing insurance in the states that have federally run exchanges, will not be eligible for federal subsidies. That could affect many of 4.5 million individuals eligible in 36 states.
Well, later in the day, the Fourth Circuit Court of Appeals also addressed the federal vs. state exchanges and subsidies but they interpreted the language differently. The language indicates that the ACA provides that individuals purchasing coverage from a state exchange are eligible for the federal subsidy. The IRS addressed this in May of 2012 and determined that an individual could obtain a subsidy if he or she “is enrolled in one or more qualified health plans through an exchange” and went on to define that to be federal or state exchanges.
What does this ultimately mean? For large employers – If the Court of Appeals for DC is upheld, it will be important because under the ACA penalties can be assessed if a full-time employee has obtained subsidized coverage on an exchange. If individuals in the federal exchanges are not eligible for subsidies in those states, employers could not be assessed a penalty. This would nullify the employer mandate for employers in states with a federal exchange and become trickier for multi-state employers. For individuals – This would make the individual market unstable and potentially unworkable in federal exchange states. The individual mandate would still apply and people with pre-existing conditions could still obtain coverage, however it would most likely be unaffordable. For now, it’s business as usual and no need to fret. Subsidies are still offered in both state and federal exchanges.
This is not yet resolved and may need to be decided by the US Supreme Court – with no immediate resolution in sight. For now, two federal appeals courts disagree…here we go again.