On May 12, 2016, the United States District Court for the District of Columbia issued an opinion in U.S. House of Representatives v. Burwell et al., No. 14-1967 (D.D.C. May 12, 2016), enjoining the federal government’s use of unappropriated monies to fund reimbursements to health insurers under Section 1402 of the Patient Protection and Affordable Care Act (the “ACA”). Section 1402 of the ACA provides cost-sharing reductions (e.g., reductions in deductibles, coinsurance and copayments) to certain people who obtain health insurance through the government exchanges. Section 1402 also provides that the insurer is supposed to be reimbursed by the government for the cost-sharing reductions it gave to those people.
The opinion did not invalidate Section 1402 or rule that insurers cannot be reimbursed at all. However, the Court ruled that Congress had not appropriated federal money for those reimbursements, and it would be unconstitutional for those reimbursements to continue without a Congressional appropriation. The injunction has been stayed pending appeal, so it remains to be seen what affect this case will have in the end. If it’s upheld, it could have major ramifications for insurance companies and individuals who rely on cost-sharing reductions. Insurers may exit the exchange market, refuse to provide cost-sharing reductions, or sue the government to get reimbursed for the cost-sharing reductions.
The decision, however, has little effect on employers that sponsor group health coverage. As you may be aware, the ACA provides that employers with 50 or more full time employees must pay penalties if they (i) fail to provide employees with minimum essential coverage or (ii) provide coverage that is unaffordable or does not meet a minimum actuarial value. Those penalties only kick in, however, if a full-time employee goes to the exchange and gets coverage along with a premium tax credit and/or cost-sharing reduction.
This case does not affect an individual’s ability to go to the exchange and get a tax credit or cost-sharing reduction. It only affects an insurer’s ability to get reimbursed for providing a cost-sharing reduction. So, if one your employees goes to the exchange and gets a tax credit or cost-sharing reduction, your company will still be on the hook for penalties.
For assistance on the ACA and what it means to your company, please contact your Jackson Lewis preferred attorney or one of the members of our Health Care Reform Team.