The HR-Pro’s Real-World Guide to the Obamacare Decision
July 16, 2015
The HR Pro's roadmap to Obamacare.

The HR Pro’s roadmap to Obamacare.

In the controversial King vs. Burwell ruling, the Supreme Court of the United States ruled 6-3 that the Affordable Care Act passes Constitutional muster as written <rimshot>.

The case had threatened to tear apart the political underpinnings of the law – and one of its chief selling points for millions of lower and middle-class voters: The subsidies available to individuals and families who purchase health insurance through health insurance exchanges established by the states <snicker>.

“Words no longer have meaning if an Exchange that is not

established by a State is ‘established by the State.” – Justice

Antonin Scalia, dissenting.

Opponents of the law had challenged the ruling under the quaint and antiquated legal theory that language has meaning, but whatev. The bottom line is that subsidies for low-income individuals and families purchasing health insurance policies state (there’s that word again!) exchanges will continue to qualify for subsidi

es. The law will not have to be torn apart and put back together again.

So relax: In choosing to ignore the plain text of the law, de jure, in favor of the du jour interpretation favored by this particular Administration. All is well and stable, until a future administration chooses to reinterpret the law according to what Congress actually wrote. This decision, of course, will promptly be challenged in what promises to be a series of very entertaining lawsuits.

Result: Short-term chaos averted; long-term chaos assured.

That means if you’ve been putting anything off waiting for the Supreme Court’s ruling, it’s time to get serious: All those reporting requirements you’ve been dreading are now, as they say, “on like Donkey Kong.”

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For Employers with 50+ FTEs

Are you an ALE (Applicable Large Employer)? You’re particularly under the gun:

If you’re offering coverage to anything less than 70 percent of your full-timers and their dependents, and a single employee signs up via the exchanges and qualifies for the subsidy, you’re going to get tagged with a ‘shared subsidy’ payment due to the IRS.

After January 1, that threshold increases to 95 percent. The margin for error is very small.

Even if you are meeting the 70 percent threshold this year, you are still at risk of having to make a shared responsibility payment to the iRS if at least one full-time worker gets a subsidy for one of the following reasons:

  1. Coverage was not offered,
  2. Coverage did not provide “minimum value” (60 percent of costs likely to be incurred under the plan),
  3. Coverage was not affordable (costing 9.5 percent of your worker’s household income or less).

Some proposals that seem to be gaining traction increase the ALE threshold from 50 to 100 employees.

Elizabeth Kubler Ross’s Five Stages of Affordable Care Act Compliance

The Road Ahead

The ruling does not preclude Congress from making other changes that many employers groups are seeking. One example is an increase in the number of weekly used to define “full-time” status under the law from 30 hours to 40 – a measure that may also provide some relief to workers in food-service, retail and similar industries who are now facing employer-imposed caps on the number of hours they can work.

Business groups like the American Benefits Council are also targeting the 40 percent tax on “Cadillac” health benefits, and pushing for other market-based changes, including beefing up health savings accounts and expanding health reimbursement arrangements to allow employers to fund a sort of “health 401(k)’ account that workers can then use to purchase their own health insurance plans in the individual market.

What To Do Now

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  • Keep close tabs on your headcount, with particular emphasis on documentation – especially if you will be near the 50 -employee/FTE threshold for ALEs at the end of the year. Being able to prove you fell short of threshold will be critical in the event you’re challenged by one of the 17,000 IRS agents authorized by the ACA. If you have delegated that to a payroll company, make sure they’ll be providing you with the documentation you need.
  • Double-check your health plan grandfathering status. If your plan was enacted prior to March 23, 2010, it may qualify for grandfathering status under the ACA – if you haven’t made any material changes to it, and if you haven’t had any periods in which the plan covered no enrollees.
  • It’s also time to take a close look at Forms 1094-C and 1095-C (for larger employers) or 1094-B and 1095-B (for smaller employers who sponsor self-insured plans), and ensure your company is tracking the right information that will allow you to complete those forms come the February 2016 filing deadline with a minimum of weeping, wailing and gnashing of teeth.