July 13, 2012
Authored by: benefitsbclp
Just when you thought we were done with lawsuits over health reform, you may be surprised to learn that there is and could be more litigation in 2015. Several dozen cases have been filed by various religious organizations pertaining primarily to mandates with respect to contraception. Later litigation, if it arises, will likely be about the employer “play or pay” (aka shared responsibility) penalties/taxes.
Under PPACA, the employer penalties/taxes are triggered when an employer either (a) doesn’t offer coverage or (b) offers coverage that is “unaffordable” or “does not provide minimum value” (we’re still waiting on definitive guidance on those terms). However, for the penalties/taxes to be triggered, at least one of an employer’s employees has to receive premium assistance (i.e., a tax credit) or a cost-sharing reduction on insurance purchased through an exchange. However, the tax credit in Section 36B of the tax code requires that the exchange be established by a State (whether this State-run exchange limitation also applies to cost-sharing reductions is less clear).
Here’s the rub: if a State fails to implement an exchange on its own, the federal government is supposed to create a fallback exchange for that State. But note the last sentence in the paragraph above. According to the statute, policies purchased on a federally-run exchange are not eligible for the tax credits (or, possibly, cost-sharing reductions). This means that, in a State with a federally-run exchange, it is theoretically possible for an employer not to be assessed a