Post­ed by Lin­da Rowings

SupremeCourtPre­mi­um tax cred­its are only avail­able to indi­vid­u­als who obtain health cov­er­age through a Mar­ket­place. A dis­pute has arisen as to whether the IRS has the abil­i­ty to inter­pret PPACA to allow the sub­sidy to indi­vid­u­als who obtain cov­er­age through any Mar­ket­place, or whether the lan­guage of PPACA lim­its eli­gi­bil­i­ty to those who have obtained cov­er­age through a state Mar­ket­place. The U.S. Supreme Court has agreed to rule on whether pre­mi­um tax cred­its may only be avail­able to indi­vid­u­als who receive tax sub­si­dies as a result of being enrolled in a state exchange. In the mean­time, the IRS has stat­ed that it will con­tin­ue to issue tax cred­its to indi­vid­u­als in both state and fed­er­al­ly-run Marketplaces.

If the Supreme Court decides the IRS rule that tax cred­its are avail­able regard­less of what type of Mar­ket­place is in place, the cur­rent sys­tem will remain in effect. How­ev­er, if it rules that tax cred­its are only legal­ly avail­able to indi­vid­u­als enrolled in state Mar­ket­places, that deci­sion will have sig­nif­i­cant con­se­quences, since only about one-third of the states are run­ning their own Mar­ket­place, while the fed­er­al gov­ern­ment runs the Mar­ket­place for the remain­ing states. If pre­mi­um tax cred­its are only allowed in states with their own Mar­ket­place, most Amer­i­cans will become inel­i­gi­ble to receive the tax cred­its. Well over half of the peo­ple cur­rent­ly enrolled in a Mar­ket­place are receiv­ing a tax cred­it. Addi­tion­al­ly, an employ­er owes the play or pay penal­ty only if an employ­ee receives a tax credit.

If the Supreme Court rules that pre­mi­um tax cred­its are only avail­able to indi­vid­u­als enrolled in state Mar­ket­places, employ­ers should expect that states that have cho­sen to pro­vide cov­er­age through the fed­er­al­ly-run Mar­ket­places will be under pres­sure to tran­si­tion to state Mar­ket­places from those who have ben­e­fit­ed from the sub­si­dized Mar­ket­places. Those that are ben­e­fit­ing from sub­si­dized cov­er­age include the indi­vid­u­als receiv­ing pre­mi­um tax cred­its, hos­pi­tals that are expe­ri­enc­ing less unre­im­bursed care, and insur­ers that have invest­ed in pro­vid­ing cov­er­age through the Mar­ket­places. Sim­i­lar­ly, states that have state Mar­ket­places may be pres­sured to move to a fed­er­al­ly-run Mar­ket­place by employ­ers try­ing to avoid penal­ties. Debate is already occur­ring as to what, exact­ly, is need­ed to qual­i­fy as a state Mar­ket­place should a state wish to move in that direc­tion. Employ­ers with employ­ees locat­ed in mul­ti­ple states could have to man­age a sit­u­a­tion in which some employ­ees are eli­gi­ble for tax cred­its and oth­ers are not.

The deci­sion of the Supreme Court is expect­ed in late June 2015.

To get the lat­est infor­ma­tion on oth­er fed­er­al devel­op­ments includ­ing plan designs being disallowed—such as employ­er reim­burse­ment of pre­mi­ums for indi­vid­ual cov­er­age, incen­tiviz­ing employ­ees in poor health to enroll in the mar­ket­place, and more—down­load UBA’s PPACA Advi­sor, “Agen­cies Dis­al­low Sev­er­al Plan Designs; Oth­er Fed­er­al Developments”.

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