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By Suellen M. Wolfe *
The Patient Protection and Affordable Care Act (hereinafter referred to as ACA) [PL 111-148, 124 Stat 119 (Mar 23, 2010)] provides for health care reform law in the United States. The ACA consists of the Affordable Health Care for America Act, the Patient Protection Act, health care related sections of the Health Care and Education Reconciliation Act, and the Student Aid and Fiscal Responsibility Act. The ACA also amends other laws like the Food, Drug and Cosmetics Act and the Health and Public Services Act.The ACA's "individual mandate" requires most all U.S. citizens and lawful permanent residents in the U.S. to obtain health coverage, qualify for an exemption or pay a fee. Individuals not covered by health insurance are required to pay the higher of $95 or one percent of their annual income. That amount rises each year until it hits $695 or 2.5 percent by 2016.The ACA sets up the American Health Benefit Exchange to serve as a competitive health insurance marketplace, i.e., Exchange. [HealthCare.Gov is the official Health Insurance Marketplace, although many states created their own Marketplace (www.healthcare.gov).] Affordable health insurance is health insurance that costs less than eight percent of a family's income. [If insurance is obtained through an employer, it can cost up to 9.5% of an American's income and still be considered affordable.] Individuals who cannot obtain affordable coverage are generally exempt from having to purchase health insurance. Some states have their own exchange. Americans are able, but not required, to choose their insurance plans from the Exchange. [Small business owners are able to purchase their own coverage and receive tax credits for up to 50% of the cost of their employee's health insurance. Small businesses with under 50 full-time equivalent employees can use a part of the marketplace called "the SHOP" (Small Business Health Options Program). Small businesses with fewer than 25 full-time equivalent employees with average annual wages below $50,000 can get tax credits to help pay for employee premiums through the SHOP.] However, Americans must maintain minimum essential coverage throughout the year.The ACA forbids insurance companies from denying insurance coverage because of a person's pre-existing medical conditions and provides rights of appeal of insurance company decisions that deny doctor-ordered treatments covered by insurance. Premium costs are no longer based on pre-existing conditions, health status, claims history, duration of coverage, gender, occupation and small employer size and industry. [The only factors that can affect premiums of plans sold through a state's Exchange starting in 2014 are the individual's income, age, tobacco use, family size, geography and the type of plan you buy.] Individuals and families earning less than 400 percent of the federal poverty level can get cost assistance through the exchange. The only way for Americans to apply for premium health care tax credits is through an exchange. [Individuals can also use the Exchange to apply for Medicaid and CHIP. Workers who are covered by insurance through their employment can use the Exchange but may not be eligible for tax credits. Medicare is not a part of the Exchange.]One of the objectives of an exchange is to allow individuals to compare health plans. Participants in the Exchanges pay into the ACA. The insurance exchange pools their buying power allowing individuals to afford private insurance plans. Regulation of cost and quality of the plans is maintained by competition.The Federal Exchange is only open during each year for an annual open enrollment period. [The first open enrollment in a state's Exchange ran from October 1, 2013, to March 31, 2014. Open enrollment for 2015 ran from November 15, 2014, to February 15, 2015. There is an open enrollment period every year as well as special enrollment periods. Seven million Americans were projected to purchase private insurance on the Exchange in 2014. Nine million Americans were projected to enroll in Medicaid or CHIP in 2014. The 101.5 million enrolled in government health programs do not use the Exchange.] During open enrollment, individuals can apply for cost assistance, enroll in a plan or switch plans without qualifying for a special enrollment period. To avoid imposition of a per month charged penalty, enrollment must occur during open enrollment. All exchange coverage counts as minimum essential coverage.King v. Burwell [576 US ____, 135 S Ct 2480 (2015).] was a challenge to a key component of the ACA. Pursuant to the provisions of the ACA, individuals can purchase competitively-priced health insurance on exchanges that may be run by either the States or the federal government. A federal tax credit is allowed to low and middle income individuals to purchase insurance through an "Exchange established by the State under Section 1311." [IRC § 368(b)(2)(A).] The IRS issued a regulation confirming that the federal tax credit is available to all financially eligible Americans, regardless of whether they purchase insurance on a state-run or federally-facilitated exchange. The issue in King v. Burwell was whether the statutory language allowing the tax credit limits its availability only to taxpayers who enroll in qualified health plans on state exchanges.
…One of the purposes of the tax credit provision is to induce States to set up their own exchanges with the consequence of the withdrawal of those credits and subsidies if States permitted the federal government to operate exchanges. With many states opting not to establish Exchanges, this Congressional objective was not accomplished. Observers opine that the opinion in King v. Burwell furthers the "Roberts Doctrine" that it is a judicial function to construe laws in ways that make them perform better, clarifying what was written by Congress.King v. Burwell fortified the viability of the Obama administration's health care law. The long-term sustainability of the Obamacare legislation remains uncertain. The ACA will be scrutinized when the Obama administration ends. Any defect uncovered in the future will undoubtedly be addressed by the political process.
* Suellen M. Wolfe is Associate Counsel to and Executive Director of the library at the Pennsylvania Legislative Reference Bureau. She is also licensed as a Certified Public Accountant. She received her LL.M. (Taxation) from New York University School of Law. Ms. Wolfe has taught as a visiting professor at law schools throughout the United States. She previously served as Chief Deputy Attorney General, Tax and Finance Section and Chief Deputy Attorney General, Charitable Trusts and Organizations Section of the Office of Attorney General, Commonwealth of Pennsylvania and Counsel to the Pennsylvania Board of Finance & Revenue. Ms. Wolfe is the Update Author of Tax Planning for the Alternative Minimum Tax (Matthew Bender).
Information referenced herein is provided for educational purposes only. For legal advice applicable to the facts of your particular situation, you should obtain the services of a qualified attorney licensed to practice law in your state.
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