Supreme Court to Hear Subsidy Challenge

Our Thinking / Healthcare /

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.
  Register for Mercer US Health News to receive weekly e-mail updates.
*Required Fields