Date: Sep 02, 2014
September 2014 -- WG Annual Meeting to be Held in Vegas

Dear Jon,

Is it true that there is another Supreme Court case challenging the health care reform law?  Can you tell me how that case affects me and let me know about any other issues I need to know about so I can run my business?

Frustrated in Fresno


Dear Frustrated,


Feeling frustrated about health care reform is warranted and it’s safe to say you’re not alone in how you feel.  Health care reform issues are constantly evolving and being challenged, but I’m here to help.  The case you’re referring to that may be reviewed by the United States Supreme Court is King v. Burwell.  At issue in this case (and another similar case, Halbig v Burwell) is whether the Internal Revenue Service (IRS) may create regulations that provide for tax-credit subsidies for coverage purchased through federal exchanges under the Patient Protection and Affordable Care Act (ACA).  The ACA does not explicitly provide that subsidies are available at federal exchanges, but it is clear that subsides are available through state-based health insurance exchanges.  The issue boils down to whether the IRS (with the Obama administration’s encouragement) is exceeding its authority when it wrote regulations allowing subsidies at the federal exchanges.

So what’s the ramification for employers in those states that have the federal health insurance exchange?  If no subsidies are awardable through a federal exchange, the large-employer mandate is potentially nullified in those states (34 states, not including California).  The mandate is triggered by the award of a subsidy and without a subsidy there is no mandate penalty.  The impact on consumers is drastic.  Without subsidies the cost of coverage skyrockets.  At the time of this writing, the petition for writ of certiorari has been filed and, if it grants review, the Supreme Court’s eventual decision will have an enormous impact on the mandate’s effectiveness and coverage costs.  California is one of the few states that created its own state-based exchange.  Subsidies awarded through state-based exchanges are not being challenged in King or Halbig, but there could be adverse implications if the decisions in these cases ultimately weaken the ACA.  On the other hand, it could result in additional states creating and operating state-based exchanges.


Other ACA Issues — Employer Reporting and Waiting Periods

In the meantime, employers must be mindful of the ACA’s other requirements, including the reporting requirements and waiting periods (both of which we’ve covered in great detail in past Dear Jon articles).  The news regarding employer reporting is that the IRS has released draft ACA reporting forms.  Health insurance issuers, sponsors of self-funded health plans (and employers participating in multiple employer welfare arrangements), and other entities that provide employee health benefit plans must file Form 1095-B and the Form 1094-B transmittal page.  Large employers that employed an average of at least 50 full-time employees (including full-time equivalents) during the preceding year must file Form 1095-C and the Form 1094-C transmittal page.  These forms are available for review online, but please note that they are merely drafts and final forms will be released soon.  The first date these forms are due is February 28, 2016 for calendar year 2015.

Finally, new guidance regarding waiting periods allows employers to impose an optional, orientation period (up to one month long) in addition to the ACA’s 90-day waiting period already in effect.  For those California employers reading this article, there is an additional wrinkle.  California passed a law requiring insurers and health maintenance organizations (HMOs) to impose a waiting period no longer than 60 days before allowing individuals to enroll in health benefits coverage.  California is now in the process passing a new law which would have the effect of repealing the 60-day waiting period and prohibit insurance carriers and HMOs from imposing any waiting periods.  What result?  In the absence of a stricter state law requirement, the ACA’s 90-day waiting period and optional orientation period apply.  For those employers that modified their plan’s terms based upon California law, an amendment may be executed and disseminated to enrollees adopting the ACA’s 90-day waiting period and optional one month orientation period.

For more information about this article or if you have other questions about health care reform contact our health care reform team today at or 800-333-4WGA.  Write to Dear Jon at

For more information and resources on Health Care Reform, visit

WG Staff Contact

Jonathan Alexander
Vice President & PCMI Compliance

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