As reported around the U.S.—and the world—the Affordable Care Act (“ACA”) survived the closely watched Supreme Court challenge. Employers nationwide, and particularly those in states where the Federal Government operates the exchange, were holding their breath for the decision issued yesterday in King v. Burwell, 2015 WL 2473448 (U.S. June 25, 2015).
At its core, the case, which originated in Virginia, asked a simple question: When the ACA says that health insurance subsidies are available to individuals in states where the “state” establishes the health care exchange, does that mean that subsidies are not available to individuals in states where the federal government establishes the exchange? The Supreme Court’s answer: Subsidies are available in all states, regardless of whether the state or the federal government established the exchange.
It is easy to see how this decision is significant for individuals. Employers, however, have a different concern. Under the ACA, large employers can either: (a) offer affordable, minimum value coverage to their full-time employees and dependent children (“play”); or (b) choose not to do so, and subject themselves to potential exposure to substantial penalties (“pay”). There is, however, one important nuance. If a large employer does not offer coverage or ACA-qualifying coverage to its full-time employees and dependents, it will not be subject to penalties until one of its employees goes to the exchange and qualifies for a subsidy. In other words, a large employer may be subject to penalties, but those penalties are not triggered until one of its employees receives a subsidy.
This employer-penalty “trigger” is why the King decision was so important for employers. If individuals in Virginia, for example, were not eligible for a subsidy because Virginia’s exchange is run by the federal government, that, in turn, means that large employer penalties could never be triggered by a Virginia employee, and it would effectively eviscerate the large employer mandate in Virginia and every other state where the federal government operates the state’s exchange. This massive disparity between states would have destabilized the entire structure of the ACA.
While yesterday’s decision is no doubt welcome news to individuals seeking subsidized coverage, it is the latest (and perhaps final) blow to employers hoping to escape the daunting task of complying with the ACA under threat of substantial penalties.
For assistance with understanding what this decision means to your company, whether large or small, call on the Woods Rogers Labor and Employment team. Attorney Josh Treece will present a roundup on the ACA at the 34th Annual Labor and Employment Seminar series taking place around Virginia beginning September 17. Learn more about this year’s seminar topics and make plans to attend now.