Circuit Court Split on ACA Could Impact Employer Penalties

In conflicting opinions released on July 22nd, two federal circuits split on whether Affordable Care Act subsidies are available under a federally operated health insurance exchange. “Pay or play” penalties apply only if employees obtain subsidized coverage from an exchange, and the majority of exchanges are wholly or partly operated by the federal government. Therefore, the resolution of this split will be significant for most large employers.

Why Were These Cases Brought?

The Affordable Care Act (ACA) gave states the primary responsibility for establishing exchanges. The deadline for doing so was January 1, 2014. If a state failed to establish an exchange by the deadline, the ACA provided for the U.S. Department of Health and Human Services (HHS) to operate the exchange for or with the state.

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