EMPLOYERS SHOULD MOVE AHEAD DESPITE ACA QUESTIONS
By JOLIE HAVENS
The Affordable Care Act has survived a barrage of judicial and political challenges, implementation failures, repeated
delays, partial repeals, elections, and constant media scrutiny. Following last month’s conflicting Circuit Court decisions on the availability of marketplace subsidies, many employers are wondering whether this latest chapter in the ongoing saga of legal uncertainty may actually lead to the law’s undoing.
On July 22, two federal appeals courts reached opposite conclusions on the ACA provision allowing individuals earning between 100 percent to 400 percent of the Federal Poverty Level to obtain subsidized health insurance through a Health Insurance Marketplace. At issue are four little words found in the ACA providing that subsidies are available through a marketplace “established by the state.” Only 16 states (and D.C.) currently operate their own marketplaces, with the rest, including Ohio, having a marketplace run by the federal government or in partnership with the federal government, also known as Federally-Facilitated Marketplaces.
The D.C. Circuit first ruled 2-1 that the IRS lacks authority to allow subsidies in Federally-Facilitated Marketplaces because the language of the ACA unambiguously limits subsidies to state marketplaces. In contrast, the Fourth Circuit then ruled that the ACA’s language is ambiguous such that the IRS may allow the subsidies. Ohio employers are now asking whether this judicial split constitutes yet another reprieve from preparing for the ACA’s employer penalties looming large on the compliance horizon. It does not, at least not yet.
First, the D.C. Circuit decision is jurisdictionally limited and has not yet taken effect. Whether it will be upheld on appeal or gain broader acceptance is unknown.
Second, broader implementation of the decision carries potentially massive consequences in states with Federally-Facilitated Marketplaces. Because employer penalties are triggered only when one or more full-time employees obtains subsidized marketplace coverage, elimination of subsidies in states with Federally-Facilitated Marketplaces would eliminate employers’ penalty exposure in those states.
While this outcome may be attractive to single-state employers, multi-state employers are likely faced with the same old headaches and perhaps a few new ones. Moreover, the taking of substantial subsidies from as many as five million enrolled individuals might cause even the most fervent strict constructionist to think long and hard. Further, broader implementation would, at the very least, partially nullify both the individual and employer mandates, calling into serious question the continued financial viability of the ACA. While opponents may not be sad to see “Obamacare” go, query whether the most celebrated aspects of the ACA—elimination of pre-existing condition limits, Medicare prescription drug savings and coverage for adult children—go, too.
Third, both rulings have followed ideological lines, and the Obama administration has indicated the intent to appeal to the full panel of the D.C. Circuit, which is dominated by judges appointed by Democrats.
Regardless of the ultimate result, time appears to be on the Obama administration’s side, and the penalties come into play for many employers in just a few months. Although the D.C. Circuit decision calls into question the law’s inevitability, employers should not delay or discontinue efforts to prepare for ACA penalties in all states in which they have employees (including those states with Federally-Facilitated Marketplaces).
Has the ACA simply gone too far to be rolled-back now? Stay tuned.
Jolie Havens is a partner in the Columbus office of Vorys, Sater, Seymour and Pease and the chair of the firm’s health care group. She can be reached at (614) 464-5429 or at email@example.com.