The immediate take-away for employers in Tuesday’s Halbig v. Burwell ruling is uncertainty about what the future brings for the Affordable Care Act. If the Halbig majority prevails, Obamacare has been dealt a serious, if not lethal, blow.
The statutory interpretation argument raised by the plaintiffs in Halbig was given little chance of success, but this attack has now gained substance and a voice through the Halbig majority opinion. Employers who had ramped up to comply with Obamacare now see that the statute may be vulnerable, and opponents have new hope.
Personally, I think that the D.C. Court of Appeals will take the case en banc – meaning the entire bench will hear the case, rather than a just select panel of judges – and reverse the panel’s decision. The Halbig case has proceeded so far along ideological lines: The district court judge (who affirmed the law) was a Clinton appointee. The Circuit Court judges who reversed were appointed by George H.W. Bush and George Bush. The dissenter was a Carter appointee.
Since the D.C. panel is made up of more Democratic appointees than Republican appointees, the logical conclusion is that the law will be upheld. But, one never knows, and the legal fight over Obamacare has taken surprising turns.
There also are two other courts of appeal looking at this issue. (Note that one of these, the Fourth Circuit Court of Appeals in Richmond, Va., upheld the law in an opinion issued just a few hours after the Halbig decision). Ultimately, the Supreme Court may weigh in, but whether it will do so remains an open question.
So, employers face more uncertainty as the process grinds along. What if the Halbig decision stands, or what if one of the other courts of appeal looking at this issue takes the same position as the Halbig majority?
The effect on employers in jurisdictions that follow Halbig would be to invalidate Obamacare’s employer mandate in those states within the jurisdiction that do not have their own exchanges.
You may recall that under Obamacare, “large” employers must offer full-time employees a certain level of health coverage at an affordable cost, or be subject to what has been called a “pay or play” tax. Employers must only pay this tax if one or more of their employees purchases health coverage through an exchange and receives a subsidy.
If subsidies are not available in states that have federal exchanges – the upshot of the Halbig ruling – then there is no employer mandate and no tax on employers who opt not to provide health coverage to their employees.
Of course employers in jurisdictions that have state exchanges (or in jurisdictions where the IRS regulation remains in place) would be operating under a different set of rules and would be subject to taxes.
Obviously that creates a mess.
There also are implications for individuals, since the IRS subsidy that was invalidated in Halbig operates to force many individuals to purchase insurance through an exchange or face an individual mandate tax penalty. Take away the subsidy and suddenly many healthy individuals do not face this tax, meaning they have significantly less incentive to become insured.
The bottom line is that the IRS subsidy invalidated by the Halbig court is vital to the operation of Obamacare because without it, far fewer healthy individuals will likely be covered. This will result in anti-selection in the insurance market, potentially causing a spike in health costs that may not be sustainable.
Time will tell if the Halbig decision remains viable. But in the meantime, a new level of uncertainty has been injected into the process, and Obamacare no longer seems quite as invincible as it did just days ago.
Bob Christenson is a partner with Fisher & Phillips LLP. He may be reached at email@example.com or 404.240.4256.
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