By Jay Starkman
On June 25, 2015, the United States Supreme Court once again upheld aspects of the Affordable Care Act (ACA), this time ruling against the most recent attack against the statute, which was based upon the words of the statute itself. ACA, or “Obamacare” as it has come to be known, continues to be the law of the land. The wholesale changes brought about by the law, both past and imminent, are here to stay, and employers must accept this. This is especially true for employers with between 50 and 99 full-time (benefit-eligible) employees, who will be subject to the “play-or-pay” provisions of the law for the first time in 2016.
The case, King v. Burwell, focused on the language of ACA that allows the federal government to provide tax credits to individuals who purchase health insurance on an exchange “established by the states.” Thirty-four states (notably, mostly “red” states), however, declined to establish a state exchange. In these states, purchasers of insurance instead can use the federal government’s healthcare exchange. The issue before the Supreme Court was whether or not the subsidies provided to individuals purchasing insurance in these 34 states on the federal exchange were unauthorized and therefore illegal. Reports estimate that approximately 5.4 million Americans purchased insurance in these states, of which approximately 80 percent received subsidies via tax credits.
In its ruling upholding the subsidies, Justice Roberts (writing for the majority of 6 Justices) stressed the interconnectedness of the three principle aspects of ACA: 1) the guaranteed issue (insurers must provide healthcare to any person) and community rating requirements (barring insurers from charging higher premiums to the sick); 2) a requirement that individuals buy insurance or make a payment to the IRS (unless unable to within the definition of ACA); and 3) the creation of a mechanism whereby insurance would be affordable, by providing exchanges and tax credits to individuals within certain defined levels of poverty. Without the third aspect of the law, an economic death spiral is created, where people wait until they become ill to buy insurance and, as a result, insurance premiums must be increased.
The Court found that the language in question, read in context with the entire law, was ambiguous and, as a result, concluded that Congress could not have intended the reading urged by the opponents of the subsidies. The federal tax subsidies were upheld, regardless of whether a state had its own exchange or adopted the federal one.
The Decision’s Importance and Impact
Most believe that the challenge presented in King, if successful, would have undermined the entire system established by ACA. History has proven that guaranteed issue and community rating requirements, without a mechanism by which insurance is made affordable to all, do indeed cause premiums to skyrocket – this is precisely what took place in Washington State and New York in the early 1990s. By upholding the subsidies, the Court (while noting that ACA does “contain more than a few examples of inartful drafting”) makes clear that Obamacare is the law of the land and the Supreme Court will not be the mechanism by which it will be undone, emphasizing that “…in every case we must respect the role of the Legislature, and take care not to undo what it has done.”
There is a large contingent of employers, those between 50 and 99 full-time employees, to whom the play-or-pay provisions (the employer mandate) do not apply until 2016. Many of these employers have been monitoring this case and waiting to formulate their strategy to provide health insurance where there previously was none. The ruling is clear: Obamacare is here to stay, at least for now. It does appear that the only means by which Obamacare will be changed is by legislative action, which is quite unlikely at the present time. Employers should move forward with this in mind.