Supreme Court Upholds Subsidies for Federal Healthcare Exchanges

In another landmark Obamacare decision, the Supreme Court of the United States on June 25th decided in King v. Burwell that subsidies apply to Exchange coverages purchased either through state-established Exchanges or the federal Exchange. The controversy developed around provisions in the Affordable Care Act that provided for subsidized, or discounted, Exchange coverage “established by the State.” The challengers argued that the cost subsidies should not be available for coverage under the federal Exchange. Without subsidies, the federal Exchange’s cost would be much greater than the cost of state-established Exchanges. The government argued that the subsidies apply to the federal Exchange as well as state-established Exchanges.

The Supreme Court held that the subsidies apply to healthcare purchased through both federal and state- established healthcare Exchanges, despite the Act’s reference to Exchange coverage “established by the State”. The Court decided that the language of the statute is ambiguous, but should be read in a way that is in accord with the context and statutory scheme of Obamacare. The Court suggested that one interpretation of the statute may be that in a state’s decision not to take the affirmative step of establishing its own exchange, it is, by default, establishing an exchange through the federal government. Further, the Court opined that the Act’s purpose could only be reasonably satisfied if its various provisions were made applicable to all individuals. Therefore, the Court rejected the challengers’ arguments that were based on plain language, and instead relied primarily on legislative intent to conclude that federal and state healthcare Exchanges should function in a like manner.

While an adverse decision may have threatened the Act’s viability, some employers were looking forward to an adverse decision. Part of Obamacare imposes a “Shared Responsibility” excise tax on employers who either fail to provide “affordable” health coverage or fail to offer coverage to a sufficient number of full-time employees (as now defined by Obamacare). The Shared Responsibility excise tax is assessed if an individual employee without an offer of affordable health coverage obtains subsidized Exchange coverage. Some employers were hoping that the federal Exchange would not be entitled to offer subsidized coverage. Thus, the employers were assuming that the “Shared Responsibility” excise tax would not be applicable for their employees obtaining federal Exchange coverage. With the Court’s decision affirming that federal Exchanges can offer subsidized coverage, this assumption is now moot. If you were hoping to avoid the Shared Responsibility excise taxes because your employees have obtained federal Exchange coverage, you may want to look into your health plan coverages. The Court’s full opinion is available here:

https://www.supremecourt.gov/opinions/14pdf/14-114_qol1.pdf

If you have any questions related to your compliance with the Affordable Care Act, please contact:

Kenneth Haneline, Esq.

Kastner Westman & Wilkins, LLC

330.867.9998 (t)

khaneline@kwwlaborlaw.com