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What Could a Supreme Court Ruling on King v. Burwell Mean for Employers?

An expected late-June ruling of the U.S. Supreme Court on the closely watched King v. Burwell case is swiftly approaching, and the pundits are buzzing. Will the Roberts Court rule in favor of the plaintiffs and strike a blow to the Affordable Care Act (aka Obamacare), or will the Obama administration survive another challenge to its signature legislative achievement? And further: What are the possible effects of a decision on individuals and companies?

For those unfamiliar, the plaintiffs in the case are calling into question a section of the law that declares federal subsidies for personal health insurance plans are to be provided through exchanges “established by the state.” It’s a question of semantics: Does “the state” refer generally to the federal government, or literally, to state governments? If it’s the latter — as the plaintiffs are arguing — that means the 34 states that have not established their own exchanges could become ineligible for federal subsidies.

Should that come to fruition, the effects could be significant, according to many media analysts. Some calculate that up to 7 million individuals in those states could no longer afford to keep their health insurance plans, while others even go so far as to speculate that a ruling for the plaintiffs could eliminate the employer mandate. Without a doubt, these would be monumental developments.

But what is doubtful is that this will ever come to pass. Many in the legal community, myself included, find it extremely unlikely that the court will rule in favor of the plaintiffs. Precedent supports the federal government, particularly in the early test of Obamacare, upholding the constitutionality of the individual mandate.

Additionally, more conservative justices are more likely to uphold Congressional intent and not legislate from the bench. The Court has five Republican appointees to four Democratic appointees. Finally, given how many people are affected by the ACA’s subsidies, the idea that the court would throw the system into disarray with a judicial opinion is strained.

Even if the Court overturned the subsidies, the implications for employers would not be as dramatic as some have predicted. Employers with 50+ employees will still be mandated to provide affordable coverage to at least 95 percent of their employees. Currently, if at least one employee also sought coverage through the healthcare exchange and received a premium subsidy, the employer would be penalized.

Some have prognosticated that without subsidies there could be no penalties, and therefore the employer mandate would be left toothless in 34 states. This is a narrow-viewed prediction. The truth is that a Supreme Court ruling in favor of the plaintiffs would not eliminate the employer mandate on its face, and the IRS would be free to pursue other avenues of determining whether or not an employer has breached its obligations to employees.

In actuality, a ruling could have employers feeling a pinch. The loss of millions of payers from healthcare plans would likely cause a spike in rates nationally, and smaller companies (those with fewer than 50 employees), might lose employee productivity as at-risk employees lose their basic healthcare insurance.

Ultimately, few companies appear to be itching to skirt the responsibilities set forth by the employer mandate. At Creative Benefits, many of our clients just want to do the right thing by their employees. A wide-scale jump through a precarious loophole, should the plaintiffs prevail, seems just as unlikely as a Supreme Court ruling against the federal government.