On June 17, 2021, the U.S. Supreme Court again ruled that the Affordable Care Act (ACA) will remain in place, at least for the foreseeable future. The justices, by a 7-2 vote, left the entire law intact ruling that the plaintiffs in the latest case had no right to bring their lawsuit in federal court. As a result, the Court did not make any determinations on the question of whether the ACA should continue to stand despite the repeal of the individual mandate, or whether the rest of the ACA can be severed from the individual mandate provision. As a result, this third major challenge to the ACA is now resolved and the ACA remains intact.
Compliance Challenges Continue Since the ACA was enacted in 2010, employers have been expected to comply with the law despite numerous legal and legislative challenges. This continuation of the ACA now means employers will continue to face the requirement to remain in compliance with the many regulations placed upon them under the ACA. This means the potential financial implications of the ACA “employer mandate” coverage and “affordability” requirements will continue, as well as the possibility of penalties for failure to file and deliver the ACA mandate reporting forms. Employers should be prepared for these and other long-term compliance requirements that will continue under the ACA, and for the likelihood of continued and increased scrutiny and enforcement activities and penalties.
Expanded Eligibility for Subsidies Creates Greater Risk for Employers The recently passed American Rescue Plan Act (ARPA) includes health insurance coverage provisions that could place employers at even greater risk of incurring IRS penalties for noncompliance with the ACA employer mandate. The ARPA represents the most sweeping health reform legislation since the passage of the ACA back in 2010. This pandemic stimulus package is intended to support healthcare affordability and increase marketplace access by expanding consumer eligibility for premium tax credits (PTCs) to pay insurance premiums. But with PTC subsidies now available to a broader population, there may be a larger subsidy-eligible population than an employer realizes within their workforce, especially for single earner households with larger families. Thus, employers need to be even more diligent with their ACA data collection and recordkeeping in case they need to defend themselves against penalty charges from the IRS if the premium on their lowest cost plan offering exceeds affordability. Employers should ensure that their record keeping and reporting vendors continue to perform at optimal levels.
Next Steps for Plan Sponsors Since the Supreme Court ruling ensures that the ACA will remain with us into the future, employers and plan sponsors will need to remain compliant and prepare for long-term sustained and increased complexity with the ACA. Employers are encouraged to invest in and focus on activities and processes that prepare them for audits and steer clear of penalties, since we are likely to see a stronger focus on audits and penalties under the current Biden administration. As such, we suggest employers fully review and understand their employer mandate penalty profile and make sure to choose an affordability safe harbor carefully, make employer contribution calculations accordingly, and ensure that the IRS Forms 1094/5-C are accurate. Of course, employers should also promptly respond to any IRS penalty letters and fully and timely cooperate with any IRS inquiries.
The Court’s ruling means the ACA remains the law of the land for the foreseeable future, although it doesn’t mean that this is forever. There could certainly be future cases that could disrupt that, or there could be changes from Congress or the current or future administrations. The focus now shifts to efforts to keep up with anticipated regulatory changes to health care law in general. We are closely following a number of regulations that are pending, such as those related to surprise billing, broker disclosures, and transparency and we will continue to monitor all developments.
Conner Strong & Buckelew will provide alerts and updates as new information becomes available. Please contact your Conner Strong & Buckelew account representative toll free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.