A travesty or a typo?…and its effects on employers

If it were not my job to understand as much as possible about the Affordable Care Act, I would not even take note of the US Court of Appeals decision earlier this week. I promise I won’t be wonky.

Here is what The Washington Post had to say about contradictory rulings this week.

The law was passed in large measure by protecting each State’s autonomy in implementing ACA. All money had to flow to the States, then the States distribute it. That was the intention and much of the sustainability of the fragile support that led to its passage.

What no one expected was for the States (36 of them) to punt on setting up their own exchanges. No exchange, no place to put the money. So, the federal government stepped in and pumped the money into their exchange.

Is the Affordable Care Act in jeopardy?

Is the Affordable Care Act in jeopardy?

At first glance, a reasonable response could be…”What’s the big deal?  A state exchange or federal exchange, who cares?”

However, the law doesn’t allow it.

Amend it? No way will this law be amended (it is toxic for both sides to open up that can of worms).

How will it go down? What happens next?

  1. It will just be accepted as the law that the intentions of ACA are being followed and nothing will happen (legalists should worry about this, because laws should matter). However, this accommodation will keep the ACA train rolling.
  2. Money will be stripped away from the 36 states and subsidies will be lost. It will erase the biggest success so far for the proponents of ACA (making healthcare affordable for low income individuals).

As an employer, what does this mean?

If the subsidies go away, then the whole thing will need to be re-thought. The taxes, fees, community rating and other things that have added cost to employer health insurance were to SUBSIDIZE the exchanges. If the feds can’t subsidize, then why pay these these costs?  Will they go away?

If the subsidies stick, then the options you are considering now (dropping insurance because of the subsidies, especially) will still be an option. The taxes, fees and costs will also keep rolling along.

Sorry, I did get a little wonkish. I guess what I mean to say is that something that appears almost to be a typo in the law is in fact a big problem. Having it out there now as a question mark creates uncertainty for employers (and everybody).

We will do our best to stay on it.

More Clouds on the Horizon: Fate of Obamacare Subsidies Up in the Air

We’ve long contended that it will take years for all the implications of the Affordable Care Act to play out. There’s still so much to be determined and so many factors, moving parts and unintended consequences that will ultimately shape the outcome.

On the heels of last week’s Supreme Court ruling in favor of Hobby Lobby (the court ruled that Obamacare’s contraceptive mandate violates the Religious Freedom Restoration Act with regards to closely held for-profit corporations) looms a series of potentially even more far-reaching court challenges to a major tenet of Obamacare — premium subsidies.

Photo credit: Reuters/John Gress as seen at TheFiscalTimes.com

Photo credit: Reuters/John Gress as seen at TheFiscalTimes.com

The arguments are now at the Appellate Court level and center on very specific language in the Affordable Care Act. The challenges contend that the subsidies cannot be provided to people in states aligned with the federal exchange; and, further, only those who signed up for coverage through the state insurance marketplaces are entitled to subsidies.

Who knows how the courts will rule? If they do rule against the government like they did in the Hobby Lobby case, the potential impact looms large. Only 14 states set up their own insurance marketplaces. 36 other states opted to let the federal government build and run their exchanges.

It will also probably take any rulings that go against premium subsidies as much as a year or more to play out. And, no doubt they will be challenged by the government — all the way to the Supreme Court, if necessary.

One thing’s for sure, any Appellate Court rulings against the subsidies will almost certainly make an already cloudy picture even cloudier.

There have been many challenges to Obamacare — some real, some grasping at straws. This one is garnering some serious attention from both sides of the fence lending credence to the belief that the fate of the subsidies for now could be very much up in the air.

For more details, read Court Challenges Subsidies, Threaten Obamacare and Halbig and King – a Simple Case of IRS Overreach

See our previous article regarding Hobby Lobby: Hobby Lobby Politics-Will The Brand Win or Lose?

Did You Receive an MLR Rebate Check from Your Insurance Carrier?

Wondering What to Do With It?

To comply with provisions of healthcare reform, insurance carriers and health plans have to provide rebates to policyholders if their medical loss ratio – the percentage of premiums spent on reimbursement for medical services and related health care quality activities – does not meet the minimum standards for a given plan year as defined in the Affordable Care Act.

Some employers will be receiving checks this month. If you receive a check and are wondering what to do with it, refer to our primer summarizing key points that may help guide you.

Example Rebate Check

Example Rebate Check

For those of you who want to drill into more technical details go to: http://www.dol.gov/ebsa/pdf/tr11-04.pdf

The IRS guidance on tax implications of the rebates can be found at: http://www.irs.gov/uac/Medical-Loss-Ratio-(MLR)-FAQs

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