By Scott Lyon, Senior Vice President
Halbig v. Sebelius aims to stop the Affordable Care Act’s insurance subsidies in federally run insurance exchanges – like the one we have here in Michigan.
A bit of background – the Affordable Care Act set up an insurance marketplace in each state and authorized the federal government to operate the exchanges in states that refused to set up their own, including Michigan. As you know, exchanges are designed primarily for people who buy health insurance on the individual market, rather than getting it through their employer. The law provides tax subsidies for those with household incomes of less than 400% of the federal poverty level to help pay for the cost of premiums.
The Halbig challenge to the Affordable Care Act argues that the Obama administration, specifically the IRS, is breaking the law by offering the tax subsidies in states with a federally run exchange. It relies mainly on the text of the law, which authorizes subsidies in “an exchange established by the State.” The argument is that phrasing restricts subsidies to state-run exchanges and does not authorize them to flow through the federally run exchange.
Now, I stopped predicting the outcome of federal lawsuits at about the same time the Supreme Court made its decision on the Affordable Care Act back in the summer of 2012. That said, this case is before the U.S. Court of Appeals/D.C. Circuit and depending on what the judges there do with the case, it could be headed to the Supreme Court. The question is – what happens in the meantime?
Halbig v. Sebelius should be in the forefront of your mind when discussing the variety of options that your customers will be faced with regarding the future of their group health plan. What no one knows is this: if the plaintiffs in Halbig prevail and the Court agrees that the subsidies made available in federally run exchanges are illegal, when will current subsidies end, will any subsidies already paid need to be returned, and any other number of questions along those lines.
If you have customers thinking of dropping their group health plan in favor of sending their employees to the exchange due to the availability of federal subsidies, or even more to the point, if you recommend they do that, and subsidies are no longer available, what will your customers think? If your customer drops their coverage because they believe that their employees and family members will be eligible for a subsidy, and due to Halbig the subsidy is no longer, what will your next move be? That is why we think it will be wise to raise this possibility with your customers. At the very least, this is a consideration that should be raised in your conversations at renewal.