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July 23, 2014

Legal Battles with the ACA Emerge As Rulings on Subsidies Conflict

On July 22, The D.C. federal appeals court panel decided the health law was illegally overreaching – the federal government could not subsidize coverage bought by people in the federal insurance marketplace. Within a few hours, a Virginia district court ruled in opposition emphasizing the HHS is still mandated to provide access to the marketplaces not offered by the state. Currently 36 states allow the federal government to establish and run their marketplaces.

If the 2-1 Halbig v. Burwell decision stands, this could mean serious, crippling consequences for the health law moving forward. As it stands, the final decision may fall to the Supreme Court.

What does this mean to employers and benefits managers? The current rulings will not have an immediate impact, though it may complicate further guidance on the employer mandate.

According to the Employers Council on Flexible Compensation, “The Halbig decision impacts potential liability under the employer responsibility provisions of the ACA, also known as the 'pay or play' penalties, imposed under Code section 4980H. The penalties are triggered if a full-time employee receives a premium tax credit. Because premium tax credits are accessed by individuals through Exchanges based on place of residence (rather than where they work),Halbig means that employers will face different exposure to penalties based on where their employees live and whether there is a FFE or a State Exchange in the State of residence. The employer penalties apply starting in 2015.” Click here to read the full ECFC article.

Click below to see the full decisions:

United States Court of Appeals for the District of Columbia Circuit 
United States Court of Appeals for the Fourth Circuit