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In a case of coincidental timing, two United States Courts of Appeals issued directly conflicting decisions today addressing challenges to the Internal Revenue Service’s implementation of the Affordable Care Act (“ACA”). The IRS currently issues refundable tax credits designed to subsidize health insurance premiums (the “ACA subsidies”) for individuals purchasing ACA compliant policies in all 50 states.  In brief, both lawsuits challenged the validity of the IRS’s decision to provide these ACA subsidies to individuals living in states that have not set up their own state level insurance exchanges.  Pennsylvania has not established its own state insurance exchange and as a result, these lawsuits are of critical interest to residents and employers alike.

In the court decision most applicable to Pennsylvania, the United States Court of Appeals for the District of Columbia issued its opinion in the case of Halbig v. Burwell early today. The Halbig court held that the IRS lacked authority to issue ACA subsidies to residents of states that had not established their own state-level insurance exchanges. As a result, the Halbig court invalidated the IRS’s policy authorizing the provision of ACA subsidies to residents of those states, including Pennsylvania residents.

The penalties imposed upon employers for failing to meet assorted ACA health insurance requirements are largely contingent upon an employer having at least one employee receive an ACA subsidy. If no ACA subsidies are available to individuals in a state such as Pennsylvania, it is doubtful that ACA penalties will be enforceable against employers in that state who fail to provide their employees with health insurance that meets numerous ACA requirements. The future enforceability of the ACA’s insurance requirements upon employers in Pennsylvania now is in doubt as a result of the Halbig decision.

Although its outcome is important, one must remember that the current Halbig decision almost certainly will not be the final word on this issue. Only a few hours after the Halbig decision was issued, the United States Court of Appeals for the Fourth Circuit issued a decision in which it reached the exact opposite conclusion and upheld the validity of the challenged ACA subsidies.  It is quite possible that these challenges to the ACA’s implementation ultimately will end up in the United States Supreme Court for final resolution.

Since these challenges to the ACA’s implementation remain in progress, Pennsylvania employers must tread carefully when making decisions on how they intend to comply with the ACA’s requirements. If the challenged ACA subsidies ultimately are upheld by the Supreme Court, employers who prematurely “bet wrong” on the outcome may be subjected to substantial financial penalties for failing to comply with the ACA.

If you have further questions regarding the Affordable Care Act, its implementation and their potential impact upon you, please do not hesitate to contact Kozloff Stoudt to discuss your questions and concerns.


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