On June 25, the Supreme Court gave PPACA its second major victory in court, ruling in a 6-3 decision that Federal Exchanges could issue subsidies to qualifying individuals. (See our old King v. Burwell post for more info on the facts of the case.) While this case is an immediate victory for PPACA with a colossal impact on the health care industry, it does set a legal precedent that chips away at the power of the presidency.
Essentially, this case confirms that PPACA is likely here to stay. All states can rest assured that their exchange may continue issuing subsidies that help certain participants pay their premiums—regardless of whether that exchange is federally-facilitated or state-run. Employers need to focus on compliance efforts and preparing to file information reporting to the IRS in early 2016. Employers must determine if they are an applicable large employer, which employees are full-time according to the regulations, whether they are offering proper coverage under PPACA, and whether they are operating at full compliance with document and record-keeping requirements. Specifically, Applicable Large Employers must submit an IRS Form 1094-C and IRS Form 1095-C to the IRS as well as provide the same notice to full time employees by early 2016, all concerning their 2015 plan year. Keep in mind that if you are an applicable large employer, whether you are assessed a penalty next year depends on your benefits strategy starting January of 2015. Employers who may have been delaying compliance, waiting to see if the law would be repealed, cannot afford to delay compliance any longer. Ratliff Law Firm stands ready to assist businesses with questions about this law.
Looking to the future and the long term legal implications of this ruling, one can observe a further step away from courts giving deference to agencies. Ultimately at issue was an IRS rule which stated “Exchange means … whether the Exchange is established and operated by a State (including a regional Exchange or subsidiary Exchange) or by HHS,” (45 CFR §155.20; see also 77 Fed. Reg. 30378 (2012)) in light of the statute, IRS §36B(b), which ties premium amounts to premiums “which were enrolled in through an Exchange established by the State.” [emphasis added].
So the question goes, can non-state-established exchanges grant subsidies? (yes)
When the court judges whether agency regulations are valid interpretations of the law, they traditionally give deference to the agency under the Chevron doctrine. Indeed, the lower courts in this case affirmed the IRS rule under the Chevron deference precedent. What is important here and interesting about this case is that the Court explicitly stated that it would not give any deference to the IRS regulation, deciding for itself whether the regulation was a valid interpretation under statute:
“When analyzing an agency’s interpretation of a statute, we often apply the two-step framework announced in Chevron, 467 U. S. 837. Under that framework, we ask whether the statute is ambiguous and, if so, whether the agency’s interpretation is reasonable. Id., at 842–843. This approach ‘is premised on the theory that a statute’s ambiguity constitutes an implicit delegation from Congress to the agency to fill in the statutory gaps.’ FDA v. Brown & Williamson Tobacco Corp., 529 U. S. 120, 159 (2000). ‘In extraordinary cases, however, there may be reason to hesitate before concluding that Congress has intended such an implicit delegation.’ Ibid….
This is one of those cases….
It is instead our task to determine the correct reading of Section 36B.” [emphasis added]
Legally, this is a significant limit on how much deference courts will give agencies in interpreting statutes, potentially slowing the reach of administrative agencies in the future. For more information on this observation, see A Catch in PPACA’s Court Ruling by Cass R. Sunstein.
This is not intended to be legal advice and does not form an attorney-client relationship with any reader.