On June 17, 2021, the U.S. Supreme Court decided a case challenging the validity of the Affordable Care Act (ACA). This is the third challenge to ACA and each time the Court has allowed it to stand.
About this challenge
The Affordable Care Act (ACA) was enacted in 2010 to require most individuals and large employers to have coverage or pay a penalty. The individual penalty was repealed, effective in 2019; the penalty for large employers that fail to provide minimum essential health coverage to their full-time employees was not changed. In view of the end to the individual mandate, Texas, a dozen other states, and two individuals (“the plaintiffs”) challenged the constitutionality of ACA.
The Court said that the plaintiffs lacked standing to bring the suit, so the justices didn’t have to decide on the constitutionality of the law. The plaintiffs didn’t show a past or future injury fairly traceable to governments’ conduct enforcing the specific statutory provision—minimum essential coverage--they attacked as unconstitutional. Since the plaintiffs didn’t have standing, the Court didn’t rule on the constitutionality of ACA.
What this means to you
Because the decision leaves in place all of the provisions currently on the books, nothing has changed for individuals and employers. What everyone has been doing continues…
Individuals may purchase individual health coverage through a government marketplace. Those with income below certain levels may obtain assistance via the premium tax credit, which is payable in advance to reduce monthly premium costs. Usually, the premium tax credit applies only if household income is below 400% of the federal poverty line (FPL), but for 2021 and 2022 this limit is waived. So, individuals (e.g., self-employed individuals without any other coverage) who have household income of 400% or more of the FPL pay 8.5% of their household income toward premiums; the balance is covered by the tax credit. Individuals may use a special enrollment period for 2021, which runs through August 15, 2021, to obtain coverage (and the premium tax credit).
Applicable large employers, defined as those with 50 or more full-time and full-time equivalent employees in the prior year, must provide minimum essential health coverage or pay a penalty. They must also file annual statements with the IRS and provide them to employees informing them of coverage (e.g., Form 1095-C). Small employers are not required to provide health coverage, but if they choose to so and meet certain parameters, they may qualify for a 50% tax credit for the premiums they pay. Small employers may continue to obtain health coverage through a government marketplace, called a SHOP (Small Business Health Options Program) Self-employed individuals may not use the SHOP; they can only use the individual marketplace.
Looking ahead to 2022, employers may be on the lookout for premium announcements so they can decide their course of action for the coming year. Typically, this happens later in the summer.