⊕ LEGAL: Health reform update: U.S. Supreme Court considers a second opportunity to limit the ACA

Jeff Jones
Jeff Jones.

On March 4, the U.S. Supreme Court heard arguments in King v. Burwell, the second major case testing the future of the Affordable Care Act (ACA). Unlike the first case, this second case does not deal with the constitutionality of the ACA. Instead, King deals with the law’s terminology.

A key feature of the ACA is to provide health insurance subsidies to people who obtain insurance coverage “through an exchange established by the state.” The issue in King is whether subsidies should also be available through exchanges (also called “marketplaces”) established by the federal government. Currently 34 states have federally-run exchanges and only 16 states plus Washington, D.C., have state-run exchanges. The plaintiffs argue that the statute means what it says, so the subsidies should not be available to residents in states that have not established their own exchange. The federal government argues that the statute must be read as a whole, and that the subsidies should be available in all exchanges.

If the plaintiffs prevail, it will derail two key pieces of the ACA. First, without subsidies to buffer the cost of health insurance, many if not most of the 11 million people who have purchased insurance through the exchanges will no longer be able to afford their premiums. Second, in states with a federal exchange, the employer mandate will no longer be enforceable. Recall that the employer mandate to offer health insurance to full-time employees applies to employers of 100-plus full-time equivalent employees (FTEs) in 2015 and 50-plus FTEs in 2016. Critically, the employer penalty for failing to offer coverage is only triggered when one or more employees receive a subsidy through an exchange. If the exchange can no longer offer a subsidy, there is no longer a trigger for the employer penalty, making the mandate unenforceable.

The final outcome will likely rest upon the vote of Justice Anthony Kennedy, who is considered a moderate on many issues, and/or Chief Justice John Roberts, who voted to uphold the constitutionality of the ACA in 2012. A decision in the case is expected in June.


 Jeffrey G. Jones is a regional managing member for Wimberly Lawson Wright Daves & Jones PLLC. He can be reached at jjones@wimberlylawson.com.

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