Employers Won’t Feel Immediate Sting from ACA Subsidy Ruling

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In another blow to President Barack Obama’s signature legislation, a three-judge panel on the D.C. Circuit Court of Appeals has ruled in favor of the plaintiff, declaring the law’s premium subsidies are invalid in more than two dozen states due to the law’s specific language.

“This has the potential to gut the exchanges and the employer requirements of Obamacare,” says Alden Bianchi, practice group leader of Mintz Levin’s employee benefits and executive compensation practice, of Tuesday’s Halbig v. Burwell ruling. “The issue will likely end up before the Supreme Court.”

In a 2-1 ruling, the court says subsidies can only be granted to those people who bought insurance in an exchange run by an individual state or the District of Columbia — not on the federally run exchange, HealthCare.gov.

Still, while it is seen as yet another blow to the Affordable Care Act, employers aren’t going to feel its impact immediately, and some experts are advising benefits managers in the meantime to ease their employees’ concerns.

Steve Wojcik, vice president of public policy at the National Business Group on Health, says the uncertainty lies with many part- and full-time employees, retirees and family members of employees who qualify for subsidies, as well as employers that were relying on the public exchanges for coverage for their employees. However, “the ruling will most likely be appealed, so this is not the end of the story,” he adds.

Also Tuesday, The U.S. District Court for the Eastern District of Virginia issued a contradicting opinion, saying that while the law does acknowledge the “existence of state exchanges,” the law still directs Health and Human Services to establish exchanges when states fail to do so themselves.

While this isn’t that unusual, it is coincidental that two district courts released different opinions within hours of each other. “This is often the case that different circuit courts have different rulings, and [it’s] why the SC takes up the case,” Wojcik adds. As of today, nothing has changed, he says, so “just sit tight.”

As the case moves along, this point could be used as a vehicle for Congress to issue clarifying legislation, Wojcik adds, such as, for example, including a more reasonable full-time hour definition for employer obligations on the exchanges.

This may lead to many employers taking a serious look at what sort of benefits they are providing, says Bill Sweetnam, principal at Groom Law Group in Washington, D.C. “I think I’m going to tell everybody to hold tight, keep calm and carry on,” he says.

“It doesn’t directly impact employers, except in the fact that you’re going to, in various states, be out of the employer mandate, because in some states you get subject to the employer mandate if someone gets a subsidy,” Sweetnam adds.

He says in some cases it has been a good thing that employers haven’t had to provide coverage for low-income families, and have instead ushered them to the state exchanges. This ruling, however, could “throw a monkey wrench” into those plans in the 36 states without the state-run exchanges.

Like Bianchi and Wojcik, Sweetnam also believes this case will eventually wind up before the Supreme Court. “This is really sort of doing the statutory interpretation, and I guess I can concede that I was sort of surprised by this,” he says.

Referencing his time working in the Treasury, Sweetnam noted there were instances when some of the more ambiguous laws needed some judgment calls. “I thought the IRS had more authority to interpret the law a little broader, but apparently this court doesn’t think so.”

Hailing the ruling, Sen. Orrin Hatch (R-Utah), ranking member of the Senate Finance Committee and a current member and former chairman of the Senate Judiciary Committee, says “[this] decision rightly holds the Obama administration accountable to the law. The plain text of Obamacare authorizes subsidies only through state exchanges, not the federal exchange.”

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