Subsidies For Health Insurance From Any ACA Exchange | Mercer US

Supreme Court to Hear Subsidy Challenge

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Supreme Court to Hear Subsidy Challenge
Calendar11 November 2014

The fate of an IRS rule allowing subsidies for health insurance from any ACA exchange — including the 34 federally run ones — now rests with the US Supreme Court, which has agreed to review a 4th Circuit decision (King v. Burwell). The high court will decide whether the ACA's language limits subsidies to state-run exchange coverage or can be read more broadly. As subsidies are crucial to expand coverage, this is a critical ACA challenge. The decision also could impact employers, since the subsidies trigger play-or-pay assessments. A ruling is expected by this summer.

In addition, the regulators issued a flurry of new guidance that includes:

  • Reinsurance fee FAQs that flesh out existing guidance by addressing approval of the last day of the month or quarter to satisfy snapshot-testing rules, reduced fee payments for partial years of plan sponsorship, and the method for designating plans counted as multiple plans. Separate IRS FAQs state that self-insured plan sponsors paying these fees (directly or via a third party) can treat them as ordinary and necessary business expenses, subject to IRS limitations. 
  • FAQs that bar premium reimbursement arrangements including cash reimbursements (whether pretax or post-tax) of employees’ costs to buy individual policies, offering employees at risk for high claims a choice between enrolling in the employer's plan or cash, and reimbursement arrangements that let employees work with brokers or agents to buy individual policies using employer funds.
  • Rules clarifying that health plans that don't provide substantial coverage for in-patient hospitalization or physician services (or both) will not qualify as minimum value coverage for 2015. Certain employers that have made written commitments to adopt — or who have started enrollments in — such plans may be able to treat them as minimum value. Regardless, employers must correct any communications implying these plans prevent exchange subsidies.
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