Employers Should Watch for Ruling on Health Care Subsidies

The U.S. Supreme Court has agreed to review a case about whether premium subsidies are available for individuals who purchase health care insurance on federally-run exchanges.

In King v. Burwell, the 4th U.S. Circuit Court of Appeals determined that, even though the language of the Patient Protection and Affordable Care Act (ACA) says tax subsidies may be paid for insurance purchased on an exchange “established by the state,” based on the intent of Congress, any exchange would allow for the federal government to provide subsidies. However, in Halbig v. Burwell, the U.S. Court of Appeals for the District of Columbia Circuit ruled the plain language of the ACA provides that only those in state-run exchanges may receive premium subsidies. The full panel of both circuits has been asked to rehear the cases.

But, the Supreme Court has agreed to review the decision in the King case. It is expected to give its ruling next summer.

Aside from the effect a Supreme Court ruling similar to the Halbig case would have on the ACA overall and on low-income individuals, the case has implications for employers. For one thing, employer penalties for not offering affordable coverage to employees are triggered when one employee goes to an exchange for coverage and receives a subsidy. For the 36 states, including D.C., where the exchanges are federally run, federal tax subsidies would stop, and employers would not be subject to a penalty.

In addition, as American Benefits Council President James A. Klein pointed out in a statement, some employers have considered whether their employees might be better served through steady coverage in exchanges, especially for workers that move from job to job. The lack of subsidies for workers in some states would change the dynamics in that decision making.

While employers should keep an eye out for the Supreme Court decision, for now, nothing is changed, and employers should continue with their efforts to comply with the law. “The IRS’ position right now is nothing has changed, so employers, until we get a consensus, have to comply,” John Haslinger, vice president of strategic advisory services at ADP in Alpharetta, Georgia, recently told PLANSPONSOR.