News & Insights

Employers Should Monitor Pending Affordable Care Act Case
November 18, 2014
by Brett Hummer


South Bend / Mishawka, IN – On November 7, 2014, the United States Supreme Court declared it would review a case that could potentially unravel the Affordable Care Act (“ACA” or the “Act”) as we know it. The case is King v. Burwell. The case could have large scale implications on the ACA’s future viability itself, and in particular it could create further uncertainty with respect to the so-called employer mandate found within the Act.

The crux of the dispute pertains to the Act’s language itself. Pursuant to the ACA, penalties under the employer mandate do not kick in unless an employee obtains a subsidy to purchase health care insurance in “an exchange established by the state”. However, many states (indeed, 36 of them) did not establish their own health care insurance exchanges. For those states, the ACA required the federal government to establish federally facilitated exchanges. What is noticeably absent from the Act is specific language that says subsidies are also available through exchanges facilitated by the federal government.

In an effort to cure this problem, the IRS issued regulations in 2012 that stated subsidies are available in both state-run exchanges and federally facilitated exchanges. But the petitioners in King v. Burwell are saying not so fast. They argue that the IRS did not and does not have the authority to make subsidies available in states that did not create a state-run exchange because those exchanges were, as the Act says, “established by the state”.

What might this mean for employers?

We will not know for sure until the Supreme Court rules, likely in the 2015 term. But if the Supreme Court agrees with the plain text of the Act, that would mean that health care insurance subsidies are, in fact, not available in the 36 states (Indiana included) that did not create their own state-run exchanges. And if subsidies are not available in those 36 states, employer penalties under the Act’s mandate could not be assessed in those states either because the penalties are only triggered when an employee receives a subsidy to purchase coverage through a state exchange.

In sum, employers should keep an eye on the Supreme Court’s review of King v. Burwell, particularly those employers who will be subject to the ACA’s employer mandate come 2016. If the Supreme Court finds the IRS-issued regulations are contrary to the plain text of the ACA, employers’ responsibilities under the employer mandate could be significantly impacted. Until then, however, employers should not use this pending case to justify delaying their plans to comply with the employer mandate.

Employers with questions concerning the ACA and the employer mandate should always consult with experienced legal counsel.

The content of this article is for information purposes only, and neither contains nor should be considered legal advice.


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