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For firms, King ruling means ‘business as usual’

In last week’s 6-3 decision in King v. Burwell, the U.S. Supreme Court again rescued the Affordable Care Act from impending doom by confirming that individuals may receive federal subsidies to purchase health insurance through public exchanges, regardless of whether the exchange is state-run or federally facilitated.

This latest ACA challenge was brought by several individuals who live in states with federally facilitated exchanges, who argued that the law’s plain language required the government to make federal subsidies available only on state-run exchanges.

Why would someone eligible for a federal subsidy bring a lawsuit arguing that they should not be allowed to receive it? Because the penalty provisions tied to the individual mandate, which require taxpayers to either carry health insurance coverage or pay a tax penalty, are waived if a taxpayer does not have access to “affordable” coverage. If subsidies were not available on the federally facilitated exchanges, then these individuals would not have access to affordable health coverage, and they would be exempt from the individual mandate. In other words, they were fighting for their right to remain uninsured.

The court’s majority issued what appears to be a results-oriented opinion, starting with the outcome it wished to reach, and then backing its way into a chain of legal arguments to arrive at that result. It began by reviewing the history of states that have attempted health care reforms without an individual mandate and subsidy, noting that a system without these latter two features was doomed to an insurance market “death spiral,” and then stating that it is “implausible that Congress meant the Act to operate in this manner.”

Periodically stopping to explain why the normal rules of statutory construction don’t apply in this case, the opinion concludes by noting that “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

It appears that the court worked very hard to find a way to interpret the act in a way that is consistent with the former.

The majority’s legal maneuvering was not lost on the dissenting justices. Justice Antonin Scalia delivered one of the more colorful dissents in recent memory, referring to the majority’s reasoning as “jiggery-pokery” and “pure applesauce,” and opining that “we should start calling this law SCOTUScare.”

While the majority opinion focuses only on the impact that the petitioners’ view would have on the individual insurance market and coverage mandate, had the decision gone the other way, it also would have crippled the act’s employer mandate.

The employer mandate, which requires “large” employers (those with 50 or more FTEs) to offer affordable minimum value health coverage to full-time employees (those who work 30 hours a week or more), is enforced by two penalties. These penalties, however, are triggered only if one or more full-time employees receives federal subsidies on an exchange. Therefore, if the petitioners had prevailed, employers that operate exclusively in the 34 states with federally facilitated exchanges effectively would have been exempt from the employer mandate.

New York employers didn’t have much riding on the outcome of this case. Because New York has a state-run exchange, employers in this state would have remained subject to the employer mandate even if the decision had gone the other way. To the extent that they operate in multiple states, however, some New York employers potentially could have avoided offering affordable minimum value coverage to their employees outside New York.

The main point that employers should take away from this decision is that “it’s business as usual.” Employers should continue diligent efforts to restructure their health coverage offerings to avoid penalties and get ready for the new reporting obligations coming in early 2016.

Kate Saracene is a partner with Nixon Peabody LLP and heads the firm’s Health and Welfare Employee Benefits team.

7/3/15 (c) 2015 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email rbj@rbj.net.

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