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Affordable Care Act Updates

The Supreme Court Decision & Patient-Centered Outcomes Research Institute (PCORI) Fees

On June 25, 2015, the U.S. Supreme Court ruled in favor of a key provision of the Affordable Care Act (ACA) which permits the Internal Revenue Service to provide tax credits for health insurance purchased through the federal exchange (also referred to as Health Insurance Marketplaces). The Court held that the tax provision authorizing the tax credits for individuals enrolled in coverage through an “exchange established by the State” refers to an “exchange” established either by a state or by the federal government.  As a result of this ruling, subsidies will remain available for qualifying individuals regardless of whether they obtain coverage on a state or federal exchange.

Background
The ACA requires states to establish state Health Insurance Marketplaces (state exchanges) through which qualified individuals and employees may purchase health insurance coverage.  If a state cannot or will not establish a state exchange, the ACA directs the Department of Health and Human Services (HHS) to “establish and operate such exchange within the state.”

Individuals who purchase health insurance through either a state or federal exchange are eligible for premium tax credits.

Currently only sixteen states and the District of Columbia have established state exchanges, while the remaining thirty-four states have some version of a federal exchange.

Supreme Court Decision
On June 25, 2015, the Court held 6-3 that the ACA’s tax credits are available to individuals in states that have a federal exchange.  The Court found, in King v. Burwell, that the tax credits are not limited to state exchanges as the ACA’s context and structure lead to the conclusion that tax credits are available for health insurance purchased on any exchange created under the ACA.

How the Decision Affects Employers
Qualifying individuals will continue to remain eligible for subsidies regardless of whether they obtain coverage on a state or federal exchange. However, subsidies generally are not available for employees who are eligible for employer-sponsored coverage, if the coverage offered meets certain affordability and minimum value thresholds.

All of the ACA provisions remain in place with this ruling.  Employers will continue to be subject to extensive reporting requirements.

Employer Self-Insured Health Insurance Fee
Employers are reminded that the fee on self-insured health plans to fund the Patient-Centered Outcomes Research Institute (PCORI) is due on July 31, 2015 for plan years that end after September 30, 2013, and before October 1, 2014.

  • For policy and plan years ending after September 30, 2013, and before October 1, 2014, the applicable dollar amount is $2.
  • For policy and plan years ending after September 30, 2014, and before October 1, 2015, the applicable dollar amount is $2.08.
  • For policy and plan years ending after September 30, 2015, and before October 1, 2019, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.

These fees are reported on Form 720, Quarterly Federal Excise Tax Return.  Electronic filing is available but not required.

For additional information contact the author Michele Burkins at mdburkins@herbein.com.