Supreme Court Hears Oral Arguments in Challenge to ACA Premium Subsidies
On March 4, 2015, the United States Supreme Court heard oral arguments in King v. Burwell, in which the plaintiffs are challenging the Internal Revenue Service’s (IRS) interpretation of certain statutory language in the Affordable Care Act regarding the availability of tax subsidies to purchase insurance coverage on federally-facilitated insurance marketplaces/exchanges. As we wrote in a previous alert, the plaintiffs are arguing that the statutory language limits the availability of tax subsidies only to insurance marketplaces established by states, not those established by or run in partnership with the federal government.
Over 30 states have insurance marketplaces that are either maintained entirely by the federal government or run in partnership between the state and federal government (such as Illinois). If the Supreme Court rules in favor of the plaintiffs, millions of individuals would no longer be eligible for tax subsidies to purchase marketplace coverage. This could have an enormous impact on the health insurance markets in those states with federal marketplaces.
In addition, penalties under the ACA’s employer shared responsibility (“employer mandate”) rules are only triggered if a full-time employee who has not been offered certain types of employer-based coverage purchases marketplace coverage and receives a tax subsidy for that coverage. If the Court strikes down the tax subsidies in states with federal marketplaces, employers in such states may no longer need to be concerned about triggering employer mandate penalties. The outcome of this case is therefore of critical importance to employers and health insurers, among other interested parties. The Court’s decision is expected in late June.