How King v. Burwell Could Shake Out For Employers

A Supreme Court decision in favor of the petitioner in King v. Burwell could trigger the end of the employer mandate, legal experts say, but it’s far from certain how the court will decide.

The highly anticipated case, heard before the Supreme Court on March 4, challenges the legality of subsidies for individuals who bought health insurance on the federal exchange under the Affordable Care Act.

Under the pay or play mandate, the penalties on the employer are all triggered by the receipt of a premium credit by an individual. If the premium tax credits are ruled impermissible, the employer mandate would essentially no longer be in effect.

“The Justices and the parties conceded that if the court were to rule in favor of the petitioners [and rule subsidies impermissible], employers who have employees in states where there are federally facilitated exchanges would not be subject to a penalty under the employer mandate,” says James Napoli, a partner in the Washington, D. C. office of Seyfarth Shaw LLP. “It was conceded that the employees in a state where the employees would not be eligible for a subsidy could not trigger a penalty under the employer mandate.”

Mark Rust, managing partner in the Chicago office of Barnes & Thornburg, agrees. “If the petitioners win this case, then in those 34 states that did not establish an exchange, employers would have no employer mandate because employer mandates only take effect in states where it’s possible for their employees to get a subsidy,” he explains.

And while no one can say for certain how the court will decide, “the court appeared 5-4 in favor of upholding the law, with Justices Breyer, Ginsberg, Kagan and Sotomayor siding with Justice Kennedy,” says Erin Sweeney, a member at Washington, D.C.-based law firm Miller & Chevalier, who was in the courtroom during Wednesday’s arguments.

“I think when you look at the petitioner’s arguments, and you accept them, then the results end up being kind of absurd,” says Stacy Barrow, an attorney with Proskauer. “The whole idea of the Affordable Care Act would seem to be to provide subsidies to all Americans who need them based on income, not just those who live in a blue state or a state that has established an exchange. It seems from the text of the Act that the federal exchange steps into the shoes of the state exchange for purposes of providing the subsidies and I think that was an argument that [Solicitor General Donald B.] Verrilli made fairly persuasively.”

The least disruptive decision for employers, believes James Slotnick, AVP, broker education with Sun Life, would be “for the law to continue as it is, for the Supreme Court to say ‘the way the law is constructed today is the way it’s going to continue to be enforced.’ And based on the questions that were asked, and which Justices were asking which questions, it seems like the day went really well for the government.”

Still, it’s a very close case, says Rust. “Justice Kennedy asked very tough questions on both sides. … he saved some of his toughest questions for the government. It’s hard to say which way he might go,” he says, adding the most interesting player is Justice Roberts, who wrote the opinion in 2012 that upheld the individual mandate. That decision, says Rust, was full of “references to the fact that the Justices are not politicians and they are not policymakers, that whether a statute is good or bad is not for the Justices to decide – it’s for the people to decide and it’s for the political process to decide. And if ever there was a case ready made for bringing that rationale back and using it again, it’s this one.”

The Supreme Court is expected to issue a decision in June. Until then, says Napoli, “the law is the law and it’s currently in effect. Employers should still plan accordingly. There are so many moving pieces and so many things that have to be accomplished from an administrative point of view – both at the systems level as well as the policy level – in a business that the employer cannot afford to wait it out to start making decisions.”

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