The Supreme Court’s June 25 decision in King v. Burwell did more than guarantee that Affordable Care Act (ACA) subsidies are available to all qualified individuals, regardless of whether they buy health insurance through a state or federal exchange. It also reaffirmed that the ACA’s employer mandate is here to stay.
If you already provide health insurance to your employees, the court’s 6-3 ruling has little effect. As long as you are already in compliance with the ACA, you don’t need to do anything.
The issue in the case was the meaning of “exchange.” The ACA encouraged states to establish exchanges so individuals could buy health insurance. The law also established a federal exchange—Healthcare.gov—which operates as a backstop in 34 states without their own exchanges.
But one part of the law contained ambiguous language that the plaintiffs contended meant subsidies were not available to anyone buying coverage through Healthcare.gov. Many feared that taking away subsidies would wreak havoc on insurance markets, setting up a “death spiral” of consumers dropping coverage, which in turn would drive up premiums for everyone—including employers that offer health benefits.
By upholding subsidies, the court averted a health insurance industry implosion. Writing for the majority, Chief Justice John Roberts observed, “Congress passed the Affordable Care Act to improve insurance markets, not to destroy them.”
The ruling that subsidies are universally available also reinforced the employer mandate. Reason: “The employer mandate is enforced through penalties that are triggered when a full-time employee receives subsidized health insurance through an online public health insurance marketplace,” said Mark Holloway of Lockton, the country’s largest insurance brokerage. “Had the federal marketplace lost the ability to provide those subsidies in the 34 states it serves, as a practical matter there would have been no enforceable employer mandate.”
Advice: Continue your ACA compliance efforts. Focus on the law’s 2016 requirement to inform employees and the IRS about the health coverage you offer. If you offer high-cost health coverage, continue planning for ways to avoid the 40% “Cadillac tax” that goes into effect in 2018.