PPACA Under Review...Again
Since the passage of the Patient Protection and Affordable Care Act (PPACA or Obamacare) in 2010, there has been a constant barrage of attempts to repeal and stop full implementation of the regulation. Congress has voted more than 55 times to repeal Obamacare with no ultimate success. However, there is a real threat to portions of the legislation based upon the interpretation of those regulations. And those threats could have a significant impact on employers.
Subsidies: For State and Federal Exchanges?
One of the key components of PPACA is the ability of individuals to obtain insurance through a health care insurance exchange and, with certain qualifications, receive a tax subsidy to help make the health insurance affordable. The subsidies are typically available for individuals who do not qualify for Medicaid and earn up to 400 percent of the federal poverty level. Section 1401 of PPACA allows for tax credits for eligible participants purchasing insurance through an exchange established by a state. Section 1311 directs states to establish exchanges, but it makes no mention of federally run exchanges. The challenge is whether the IRS properly interpreted the legislation to allow those subsidies to also be available on federally operated exchanges and not just state run exchanges. Thirty-four states, including Missouri, use a federal exchange.
Mixed Signals from the Courts So Far
On July 22, 2014, judgment was rendered regarding two legal cases challenging Obamacare with very different rulings. In the case of Halbig v. Burwell, the D.C. Circuit Court held that the statutory language was clear and the IRS may not expand the language to apply beyond the states that established insurance exchanges. However, in the second case King v. Burwell, the U.S. Court of Appeals for the Fourth Circuit held that the language is ambiguous and the IRS can expand the tax credits' availability to the states with federal exchanges.
Upcoming Court Decision and What It Could Mean
On March 4, 2015, the US Supreme Court will hear oral arguments in the King v. Burwell case. If the Supreme Court rules that federal subsidies are only available through state exchanges rather than the expanded interpretation that includes federal exchanges, subsidies would potentially no longer be available to those insured persons who received a subsidy through a federal exchange. The loss of these subsidies would potentially make health insurance unaffordable for those insured individuals. This would undermine the legislation's goal of reducing the number of uninsured Americans, which dropped by an estimated 8 million to 10 million during the first open enrollment period. Approximately 87 percent of individuals who enrolled through Healthcare.gov, the federal exchange, are receiving subsidies. In Missouri, over 200,000 residents have enrolled for health insurance through the federal exchange as of the end of January 2015, representing an increase of more than 23 percent from 2014. Approximately 88 percent of those insured in Missouri are receiving financial support through subsidies.
Should the ruling support subsidies for only state exchanges, Congress will have to take action to fill the void created within the 34 states working with a federal exchange. According to a recent Kaiser Health Tracking Poll, 64 percent of those surveyed indicated Congress should pass a law allowing the lower-income population in every state to purchase health insurance with financial subsidies. The poll further indicates that a full 82 percent of Democrats surveyed think Congress should take action while only 40 percent of surveyed Republicans agree with Congressional action.
The very fate of a key provision within the PPACA regulations will soon be in the hands of the Supreme Court. With a ruling expected toward the end of June 2015, many are trying to determine which provisions of PPACA will be impacted and what it might mean for the future of the entire legislation.
Click here to learn about the potential consequences employers will face based on the outcome of this ruling. Or contact Ron Present, Partner and Health Care Industry Group Leader, at 314.983.1358 or firstname.lastname@example.org.