
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Author: Dan Brecher
Date: June 25, 2015
Counsel
212-286-0747 dbrecher@sh-law.comThe Affordable Care Act ruling, which involves subsidies provided to individuals who purchase insurance via Healthcare.gov, has the potential to dramatically shake up the healthcare industry.
The lawsuit, King v. Burwell, specifically addresses whether the Internal Revenue Service (IRS) may permissibly promulgate regulations to extend tax credit subsidies to coverage purchased through exchanges established by the federal government under Section 1321 of the ACA. Under the statute, tax credits are available for health insurance that is purchased through an exchange “established by the State.” However, after most states failed to create their own marketplaces, the IRS extended the subsidies to insurance purchased through the federal government’s exchange, which is operated via Healthcare.gov. More than six million people have purchased insurance through the federal exchange – the majority of whom received the tax subsidy.
The federal courts that have addressed whether the subsidies are limited to state exchanges have reached differing conclusions. Rather then wait to let a circuit split emerge, the U.S. Supreme Court elected to intervene in the fate of the ACA. If the Court adopts a narrow interpretation of the statute, the whole healthcare scheme could be thrown into a tailspin. Citizens of states that failed to set up their own insurance marketplaces would not receive a tax subsidy and would also not be penalized for failing to obtain health insurance. Experts predict that if a significant number of Americans left the program, the cost of insurance would skyrocket and put it out of reach for many.
For businesses, the Supreme Court’s decision could also eviscerate the employer mandate. Under the ACA, businesses with 50 or more employees will be required to offer health insurance to full-time employees, or pay a penalty. If the Court strikes down the subsidies for the federal exchange, the penalty for failing to comply would not be triggered since it only applies when workers receive tax credits for health insurance purchased via one of the exchanges.
Scarinci Hollenbeck’s legal team will have coverage of the Court’s decision in King v. Burwell on this blog as well as the Constitutional Law Reporter. So please stay tuned.
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