SCOTUS ruling on ACA subsidies ‘a call to action’ for employers

The U.S. Supreme Court’s ruling upholding federal subsidies for approximately 6.4 million Americans who have obtained health coverage through a federally-facilitated exchange  sends a clear message to employers that the Affordable Care Act is here to stay. In a 6-3 vote, King V. Burwell is the second U.S. Supreme Court ruling to uphold ACA legislation since it was signed into law in 2010.

The ruling should represent a call to action for employers who have either ignored the law hoping it would go away, or those that delayed signing contracts or postponed making benefit design changes. For large employers, addressing ACA IRS reporting requirements looms as a critical immediate concern as failures could lead to significant penalties. It is now more important than ever for employers to know their health reform compliance dates and reporting deadlines.

What’s next?

Although the decision centered on subsidy payments, the ruling affirms the ACA employer mandate — in effect now for large employers and coming soon to smaller groups — requiring businesses to offer every full-time employee and their dependents health care coverage, or face stiff penalties.

Furthermore, the employer mandate will identify organizations with 50 to 99 lives as “small businesses,” previously a distinction reserved for those only with two to 49 lives. This levels the playing field; subjecting all businesses under 100 lives to manually rated insurance premiums and leading to increased rates for many.

Employers of all sizes will be subject to the ACA’s Cadillac tax, an excise tax on “Cadillac” health care plans scheduled to take effect Jan. 1, 2018. This new tax will apply to every size business, even those under 50 lives, and could hit small businesses sooner if their premium rates increase (as described above), while larger employers — and particularly those on the East Coast where health care costs are highest — may already be hitting Cadillac tax thresholds.

Also see: "SCOTUS decision returns adviser focus to ACA compliance."

Many employers were probably hoping on some level that everything was going to go away — closing their eyes wishing for some good outcome that would protect them from the looming change they’d have to make down the road. This ruling means employers won’t be shielded by the Supreme Court. The status quo has been maintained and everything will proceed on schedule.

So many new requirements mean employers have to prepare today to be in compliance tomorrow. HUB suggests creating a three-to-five year strategic employee benefit plan to rollout potential benefit changes for all size employers, including medical, voluntary, wellness and more.

Employers need to now ask themselves, “How am I going to prepare my workforce for these changes?” Communicating that an organization may be required to reduce benefits will not be an easy message to share. A three-to-five year employee benefit plan allows an employer to focus on where they’re going to land in 2018 and will help optimally position an employer to help mitigate the possible pain down the road.

Now is the time to start preparing.

Also see: "Despite SCOTUS support, challenges remain for all public exchanges."

Bogardus and Fiszer are chief compliance officers for HUB International Employee Benefits.