No Play-or-Pay Penalty in States with a Federal Exchange?

March 2017

DC Appeals Court holds that premium subsidies are not available to enrollees in Federal Exchanges

The U.S. Court of Appeals for the DC Circuit has dealt a serious blow to the Obama Administration today with a decision that calls into question the structural integrity of the "pay-or-play" mandates under the Affordable Care Act ("ACA").

In Halbig v. Burwell, the Appeals Court for the District of Columbia Circuit, sitting in Washington, DC, sided with the plaintiffs and against the Obama Administration today when it held that the ACA, by its terms, does not allow for subsidies for individual coverage in exchanges established by the federal government. Today, a majority of the states – 34 – have federally-run exchanges. This means that, at least according to this court, individuals purchasing insurance coverage on the federally-run exchanges will not be eligible for federal subsidies when they purchase insurance. This is significant to employers because one of the triggers for assessment of a penalty against an employer under the ACA is that a full-time employee has obtained subsidized coverage on an exchange. If individuals in 34 states are not eligible for subsidies on the exchanges in those states, employers in those states cannot be assessed a penalty.

Employers need to continue to monitor new developments and implement strategies for complying with the ACA. To learn more about the impact of this and other health care reform decisions, please visit Peel & Holland University, where we have posted a document titled No Play-or-Pay Penalty in States with a Federal Exchange.

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