How ACA Compliance Changes As A Result of the King v. Burwell Ruling
June 25, 2015
By Todd Praisner, Tango Health CEO and Founder
Today the Supreme Court ruled on a case called King v. Burwell. Over the past few weeks, many have provided their views on what was and was not at stake in the ruling, increasing the confusion and uncertainty around the Affordable Care Act (ACA).
The issue that has been under consideration by the court is whether the ACA intended for individual subsidies (received by people who get their insurance from state and federal exchanges established under the ACA) to apply in all exchanges, or only in state-run exchanges. Currently 13 states plus the District of Columbia run their own exchanges. The other 37 states depend either wholly or in part on the federal government to run their exchanges.
It has been the position of the government that the ACA clearly intended subsidies to apply in all exchanges. It was the position of the Republican-backed plaintiff that the law only intended for subsidies to apply in exchanges “established by the state”.
Practically speaking, there were two possible rulings:
- The Supreme Court would rule in favor of the government, agreeing that individual subsidies apply in all exchanges, or
- The Supreme Court would rule in favor of the plaintiff that individual subsidies do not apply in federally run exchanges.
The potential implications of a ruling to deny individual subsidies in states with federally run exchanges were vast, but I’ve outlined the basics here:
6.5 million people would lose their subsidies. That’s how many people receive subsidies in the federally run exchanges. It was the prevailing opinion that without subsidies to make coverage affordable, most would terminate their coverage. Individual penalties for not having coverage would remain in place, but it was believed that penalties would likely be lower than the cost of unsubsidized premiums.
Rates for individual policies (and possibly small business policies) would likely spike. It was believed that the sickest people would stay enrolled at all costs, while healthy people would leave the exchanges if the premiums were higher than they could afford. There would have been no changes about the requirement for insurers to issue coverage to all applicants regardless of pre-existing conditions or the elimination of lifetime maximums on coverage. Insurers would have needed to increase their rates to replace the lost money that was previously coming in via subsidies.
Employers would be insulated from fines and penalties. The ACA employer penalties for Accessibility and Employer Shared Responsibility, sometimes referred to as Pay-or-Play, are triggered by one or more employees receiving an exchange subsidy. If employees enrolling in federally run exchanges were not eligible for subsidies, there would be no possibility of a penalty-triggering event for employers in those states.
Since the Supreme Court ruled 6-3 that federal subsidies are valid in all exchanges, the Affordable Care Act has cleared the last substantive legal challenge on the horizon, and there are no longer any reasons for employers to sit on the sidelines hoping that the requirements will go away.
It’s time for action: employers must accurately report on the 6055/6056 requirements under penalty of perjury and reporting-related fines in all states. There will be no relief on the mandatory ACA compliance requirements, and organizations are already on the clock.
Tango is already providing ACA Compliance solutions for organizations ranging from 800 employees to over 50,000 a wide range of industries. We’re ready to help your organization tackle ACA challenges, but the time to act is now. Contact Tango Health today for a demo or to find how to get started.