ObamaCare rulings could create disadvantages for Mass. businesses
by Jessica Bartlett
July 22, 2014
Source: Boston Business Journal
Health care experts are warning about the potential impact of two conflicting federal appeals court decisions focused on President Barack Obama’s health care law as state officials grapple with the contrasting rulings.
Issued on Tuesday, the rulings dispute whether or not the government could subsidize health insurance premiums in three-dozen states that use the federal exchanges.
While Massachusetts is in the midst of adjusting its problem-plagued state-based exchange, the state may potentially switch to a federal exchange for a year while the revamped state program is developed. Engineers are developing both systems so that at least one is ready by fall.
“These rulings reinforce our commitment to remaining a state-based marketplace that continues the Commonwealth’s nation-leading access to affordable, quality health insurance," said Jason Lefferts, director of communications with the Commonwealth Health Insurance Connector Authority. "While we review the decisions’ potential impact, we will continue our work on the dual track plan, which ensures that no matter what, we will have a working website this fall."
Lefferts said the state would be make a final decision early next month about whether to immediately pursue the federal option.
The direction could have bigger implications than just which exchange residents will be using. The U.S. Court of Appeals for the D.C. Circuit said Tuesday that, due to the health care law’s wording, the government isn’t authorized to help Americans pay for health insurance in states that declined to establish their own health insurance exchanges.
Hours later, the United States Court of Appeals for the Fourth Circuit issued a conflicting decision that supported the subsidies, one of the hallmarks of the Patient Protection and Affordable Care Act, or ObamaCare, as it’s become known.
Peter Marathas, who heads up the employee benefits practice in the Boston office of global law firm Proskauer, said Massachusetts could be classified as a federal exchange and subject to the subsidy cuts if the state switches to the federal exchange while the state exchange is being developed.
"If they elect out of running a state exchange and opt running the federal exchange, that would make Massachusetts a federal partnership or federal exchange, and if the (the first appeals) decision is correct, the subsidies wouldn’t be available," Marathas said.
According to the National Center for Policy Analysis, subsidies are a key part of the health insurance premium costs for millions of residents around the country. Of the 8 million who enrolled in Obamacare on an exchange, only one-third did so through a state-based program. (Massachusetts at the time was one of them.)
That leaves 5 million who thought they qualified for a subsidy vulnerable to a doubling of their premium costs if subsidies under federal exchanges are no longer allowed, the center said.
Even if Massachusetts remains classified as a state-based exchange, the ruling could affect local businesses.
Currently under the play or pay provision, certain business must provide their full time employees health insurance. If an employer refuses, and that employee then receives subsidized health care on the exchange, the employer may face a fine.
Because Massachusetts would have its own state exchange, subsidies would still be possible and penalties still potentially inflicted on businesses within the state, starting in 2015. Yet if the federal government cannot offer subsidies in states using federal exchanges, businesses in those states wouldn’t have to pay a penalty, because there would be no subsidy for their employees — putting a number of Massachusetts employers at a potential disadvantage compared to many out-of-state competitors.
“If this decision stands, an entity doing business in Massachusetts that might be faced with a penalty if it doesn’t provide affordable care is at a disadvantage to a businesses doing business in Maine,” Marathas said. “The penalty wouldn’t qualify because the subsidy isn’t available.”
Yet with the conflicting rulings, it's unclear whether the subsidies would be abolished.
Marathas said next steps to make a decision should crystallize within days. The Obama administration can have the D.C. Circuit Court undertake an en banc review, which would require all seven judges in the court to review the decision that three judges made.
Because there is a conflict within two appellate courts, the case could also go to the Supreme Court of the United States.
“It is the kind of case that is ripe for Supreme Court review,” Marathas said.