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From the Trust Perspective: SCOTUS decision: What does it mean for us? 

by League Associate Director Risk Management Services Bob Haynes

On June 25, the Supreme Court of the United States published the King v. Burwell opinion. This case addressed the question as to whether people living in one of the 34 states that did not set up a public exchange to offer medical insurance would continue to be eligible for a subsidy - even though that exchange is facilitated by the federal government, not the state. The IRS issued a regulation in 2012 providing for subsidies whether coverage was purchased in a state or federally run marketplace. However, the language within the Affordable Care Act expressly states that the IRS may grant subsidies only for coverage purchased form exchanges established by the state. The plaintiffs argued this language was meant to incentivize the states to create their own exchanges.

Bottom line: this ruling preserves the status quo whereby individuals with income between 100% and 400% of the federal poverty level will continue to receive subsidies.

Had the Court gone the other direction and ruled subsidies are not permissible for individuals in federally run exchanges, then employees who purchase coverage through these facilities would not trigger penalties for their employers and the punitive effects of the employer mandate would have been lessened.

So, the message for employers in North Carolina is to carry on, the rules and regulations around the ACA are not changing as a result of this decision. The issues that existed prior to the ruling remain. These include, but are not limited to: treatment of pre-65 retirees not yet eligible for Medicare, 6055 and 6066 IRS reporting (as discussed in the May/June issue of Southern City), and controlling the cost of your plan to avoid the Cadillac tax that takes effect in 2018. Retirees: Some have asked the question as to whether they can discontinue provision of medical benefits to retirees and establish a health reimbursement arrangement to fund coverage through the public exchange thus allowing retirees to select a plan of benefits to meet their needs and perhaps receive a subsidy. While this strategy could save you money while enabling your retirees to obtain better coverage than what you currently provide, any final decision will require careful review of your personnel policy and consultation with your attorney.

IRS Reporting (Section 6055 and 6056 of the IRS Code): Employers must file electronic reports by March 2016 about the health coverage offered to full-time employees to confirm that the employer is complying with the employer mandate and for the IRS to confirm that subsidies are not being provided to individuals covered by an employer plan that meets ACA requirements. Surveys indicate most employers are ill prepared. Now is the time to begin preparations, i.e. determine necessary data, how best to compile the data and begin to keep proper records. Experts say that the reporting requirements are complex and in some cases ambiguous.

Cadillac Tax: The Cadillac, or Excise, Tax will be effective in 2018 and assessed on plans that cost more than $10,200 for single and $27,500 for family coverage. This 40% tax is applied to the amount in excess of the threshold amounts noted above. Many business groups are calling for repeal of this aspect of the ACA, including the American Benefits Council, the National Association of Manufacturers the National Business Group on Health and the U.S. Chamber of Commerce. It is anticipated that more than 40% of the plans will be affected in 2018 and 82% in 2023 (per survey by Towers Watson).

In conclusion, we recommend that you continue your efforts to meet ACA requirements relative to IRS reporting, enhance your wellness efforts to bring down your claims to avoid the Cadillac tax, and look at options for retiree coverage within the guidelines of your personnel policies.