Adding to ACA Uncertainty

ACAA pair of appeals court rulings made just hours apart yesterday seem to have compounded employers’ confusion surrounding the Affordable Care Act.

First, the 4th Circuit U.S. Court of Appeals in Washington ruled in the case of Halbig v. Burwell that the ACA does not permit the Internal Revenue Service to distribute premium subsidies in the 36 states where exchanges are run by the federal government.

Later in the day, a federal appeals court panel 100 or so miles down the road in Richmond, Va., took the opposite view, determining the ACA’s “ambiguity” affords the IRS the authority to issue the subsidies.

Reaction to the contradictory rulings—which seem to pave the way for a likely Supreme Court case—was swift, strong and, politically speaking, true to party lines.

Noting his dissent in the later ruling, D.C. Circuit Judge Harry T. Edwards described the decision as a “not-so-veiled attempt to gut the Patient Protection and Affordable Care Act.”

Meanwhile, the conservative side of the aisle commended the Richmond panel’s decision.

Speaker John Boehner, for example, described the ruling as “further proof that President Obama’s healthcare law is completely unworkable,” saying in a statement that the Affordable Care Act “cannot be fixed.”

For employers in the majority of the U.S., what happened yesterday just seems to further cloud an already uncertain future with regard to the ACA.

“The D.C. Circuit’s decision is significant in that it calls into question whether employers [in the affected states] could be subject to a penalty under the ACA’s ‘pay or play’ penalty scheme,” according to Peter Marathas, a Boston-based partner in Proskauer’s employee benefits, executive compensation and ERISA litigation practice center.

Yesterday’s decisions are “not the final say on this issue,” he says, “but [they] certainly underscore the thin thread much of the employer penalty hangs on, particularly if other courts agree with this decision.”

The matter “seems destined for the U.S. Supreme Court,” said American Benefits Council President James A. Klein, in a statement.

Klein also offered his take on how things may ultimately shake out.

“Since the employer mandate penalty is triggered when employees receive a subsidy, some employers may be relieved of penalties, or may have different levels of penalties, depending on which states their workers reside.”

In addition, some companies have weighed whether employees may be better served through steady coverage in exchanges, especially those who frequently change jobs, said Klein.

“The lack of subsidies for workers in some states certainly would change the dynamics in that decision making,” he noted, adding that further uncertainty over the implementation of the healthcare law “chills” the decision-making process for employers.

“The courts need to quickly resolve this critical issue,” he said, “one way or the other.”