The time of “what-ifs” for employers ended Thursday as the U.S. Supreme Court issued its ruling upholding the state subsidies challenged in King v. Burwell, and employers should maintain business as usual going forward, according to most industry observers.
The court ruled 6-3 that contested language in the Affordable Care Act allows the administration to offer subsidies in the form of tax credits to people in all states, including those who buy health coverage on the federal insurance site HealthCare.gov.
“The premium tax credits for individuals and their families will remain available in states with federally established exchanges,” notes Joanne C. Youn, a member of legal firm Caplin & Drysdale. “This means that employers with employees in those states will be subject to potential penalties under the employer mandate with respect to such employees.”
“[Thursday’s] decision is consistent with prior messages from the IRS, in that reporting for 2015 will proceed as scheduled,” adds PricewaterhouseCoopers’s Amy Bergner, a managing director in the human resource services practice. “For many employers, the tasks surrounding reporting — making business decisions and aggregating and transforming data — are daunting, and resources are strained. Employers must continue on the path of preparing for reporting, or rapidly start to do so.”
Bergner anticipates many employers will move forward with their decisions about ACA reporting very quickly following the Supreme Court’s decision.
“I think biggest thing is there will be no disruption in coverage,” says Brian Marcotte, CEO of the National Business Group on Health. “There are a number of employers in these affected states who rely on exchanges for their early retirees or their part-time employees. So it’s not that the bulk of their employees were covered in exchanges. But they did have pockets of people covered, and the concern was that if this went the other way there would be a disruption in coverage and how would that be addressed.”
And, Marcotte adds, with this decision behind us, the focus can now be moved to improving the ACA, especially other parts of the law such as the Cadillac tax, the ever-evolving definition of full-time employees and, from a larger perspective, examining the way we deliver and pay for health care in this country.
“It’s worth noting that the six justices who ruled in favor of the government did so by means of a single opinion without concurrences,” notes Youn, who focuses on areas of employee benefits law and ERISA. “This suggests that at least some provisions of the Affordable Care Act can be upheld by a clear and consistent majority on the court.”
“While it is not the main point of the decision, another notable aspect of the ruling is the court’s conclusion that this area of law is too important for Congress to have delegated to the IRS,” she points out, “and therefore that an exception was warranted to the general rule of statutory interpretation previously established by the court under Chevron.”
“This is good news for the some 6 million individuals in 34 states who stood to lose their subsidies if the challengers had succeeded,” says Bob Seng, a partner at the international law firm Dorsey & Whitney. “And there are likely some Republican governors who are quietly breathing a sigh of relief, having both argued against Obamacare and dodged this bullet.”
With the political firestorm brewing in the coming months leading up to the 2016 presidential election, the real question is whether the Republicans continue to cling to Obamacare as a key issue, Seng adds.
“This is the Republicans’ last hope at a judicial fix,” Seng says, noting in the upcoming elections lawmakers may begin quietly working on changes to key provisions like the tax on high cost plans or the medical device tax.
“Hanging on to the political issue is more likely and not necessarily good for employers, insurers, providers and hospitals who are struggling with a great deal of uncertainty,” he adds. “It would be difficult if not impossible to repeal Obamacare in a few years, but it’s very possible to continue to use it as a political football.”
This will likely be the last major hurdle the Affordable Care Act faces from court challenges, says Bill Melville, market analyst for Decision Resources Group. There will be many more lawsuits, but this poses an existential threat to expanded health insurance coverage and the reform law as a whole.
But, he cautions, be prepared in case the Supreme Court puts some unforeseen twist on upholding the subsidies. In 2012, he notes, the court upheld the law in National Federation of Independent Business v. Sebelius, but made Medicaid expansion voluntary for the states, creating a country of health care haves and have-nots. Only about 30 states have expanded Medicaid, he noted.