King v. Burwell: Subsidies Stand
The U.S. Supreme Court has issued a ruling in the King v. Burwell case stating that the Affordable Care Act (ACA) does in fact allow the Internal Revenue Service (IRS) to provide Premium Tax Credits, or subsidies, for health insurance provided under the Federal Marketplace. Although the language of the law states that subsidies are only to be available for Marketplaces (also referred to as Exchanges) “established by the state,” the law’s architects argued that subsidies were meant to be made available through both State and Federal Marketplaces as the goal of the ACA is to make coverage available to all Americans. The Supreme Court agreed in a 6-3 decision.
Acknowledging the plaintiffs’ argument that the language in the statute is “ambiguous,” Chief Justice John G. Roberts Jr. said their interpretation of the law “would destabilize the individual insurance market in any state with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid.”
But what does this mean in terms of Affordable Care Act management for employers?
The decision provides certainty that ACA is here to stay, meaning that the Pay or Play rules remain unchanged and that upcoming reporting deadlines are still intact. If they haven’t already, employers must prepare for new forms of communication, interaction, and processes involving the three key stakeholders: employees, the Exchanges, and the IRS.
If they haven’t already, employers will begin receiving subsidy notifications in 2015 from the Exchanges and must determine how to manage and respond to the notifications. In addition, employers must collect the necessary data to populate indicator codes on form 1095s and distribute the forms to employees by February 1, 2016. Copies of the 1095s received by employees along with form 1094s must be sent to the IRS by March 31, 2016. The IRS will use these forms to determine whether individuals and/or employers will be penalized for failure to comply with mandates. Once a penalty is assessed, individuals and employers will have an opportunity dispute the fine.
As a continued thought leader in ACA management, Equifax will host a webinar on July 7 to share more information about the impact that the ruling will have on employers. The webinar will go into detail about the complex processes involved in managing the ACA as well as best practices learned by Equifax and legal experts in helping hundreds of employers with:
- Data management and IRS reporting
- Subsidy notifications and appeals
- Employee communication and education