Capital Thinkers is an occasional series written by leading thinkers, experts, and policy makers from across the nation's capital. Today's guest blogger is Paul Fronstin from the Employee Benefit Research Institute.
The future of employment-based health benefits is always of strong interest in the work we do at the Employee Benefit Research Institute (EBRI). During an EBRI forum in 2014, EBRI members heard various viewpoints on its future in the aftermath of the implementation of the Patient Protection and Affordable Care Act (ACA) (see a recap of the discussion here). Since the panel discussion, issues have emerged regarding the King vs. Burwell case before the Supreme Court of the United States (SCOTUS). The outcome of this case has major implications for employment-based health benefits, yet many employers have yet to form an opinion about it.
A recent Mercer survey of nearly 600 US employers asked respondents whether they would favor or oppose disallowing federal premium tax credits for individuals in states that do not operate their own exchange (see more on the survey results) . The survey found that 27% favor disallowing such premium tax credits, 31% oppose them, and 42% had no opinion. Disallowing premium tax credits could mean that enrollment in public marketplaces would fall by 9.6 million, and premiums could increase 47% (learn more). While much of the focus has been around public marketplaces, disallowing premium tax credits would also have implications for employers, workers, and employment-based health benefits.
On March 4, 2015, SCOTUS heard oral arguments in the case of King vs. Burwell. SCOTUS will decide whether the ACA allows individuals receiving coverage through public exchanges to receive premium tax credits in states with federally-facilitated exchanges. A total of 34 states did not set up their own exchanges. Instead the federal government operates the exchanges in these states. In 27 states, federally facilitated marketplaces are offered. In these marketplaces, the US Department of Health and Human Services (HHS) performs all marketplace functions. Consumers in these states apply for and enroll in coverage through healthcare.gov. In seven states, state-partnership marketplaces are offered. These states are considered to have a federally facilitated marketplace. These states may administer in-person consumer assistance functions, but HHS performs the remaining functions, and consumers in these states apply for and enroll in coverage through healthcare.gov.
Employers may not be aware of the implications of the SCOTUS ruling. If SCOTUS concludes that the federal government is prohibited from offering premium tax credits to individuals purchasing coverage in federally facilitated exchanges, employers operating in those states will not be subject to the Employer Shared Responsibility Provision (a.k.a., Employer Mandate Provision) in the ACA. The Employer Shared Responsibility Provision requires that employers with 50 or more full-time employees either provide health coverage to their employers or pay a $2,000 per employee assessment if coverage is not provided. The $2,000 assessment is applied only when at least one employee receives subsidized coverage through the public exchange. A $3,000 assessment is applied for each employee that receives subsidized coverage because they opting out of employer coverage that either did not meet affordability or minimum value standards. In both cases, in states where premium tax credits were not allowed, by definition, workers would not be eligible for premium tax credits, therefore employers could not be penalized for either choosing to not provide coverage, or for providing coverage that did not meet affordability or minimum value standards. The assessment would continue to be applied in states that operate their own exchange.
Employers that have a large presence in states with federally facilitated exchanges will not be penalized for failing to provide affordable, minimum value coverage. However, they may not want to opt-out of providing coverage to employees in these states, as the individual marketplace may not be a viable alternative for their workers.