Triggering ACA fines to employers #159688 - Ask Extension


Triggering ACA fines to employers #159688

Asked November 06, 2013, 12:45 PM EST

I have read that according to the ACA the action that triggers the IRS investigation of an employer for not providing healthcare is for an employee to enter a state exchange. Some analysts have therefore suggested that no "trigger" exists in the 36 states that have no state exchanges. Consequently, they state that in states that have no exchanges, no fines will be assessed employers for the failure to provide health insurance. A similar challenge to the ACA is in the federal court system at this time.  The ACA states that the federal government will provide subsidies for those below a predetermined income level who purchase health insurance through a state exchange.  The present administration intends to subsidize those who purchase health insurance through the federal exchange as well.   The ACA does not address the subsidizing of health insurance premiums for those who purchase from the federal exchange.  Therefore, this has been challenged in court and is expected to be addressed by the US Supreme Court.  I suspect that the ruling on this challenge will be applied to the issue about which I am asking above.  Your assessment of this perspective?

Knox County Indiana

Expert Response

According to the Affordable Care Act, the penalties apply when an employee of a company that employs 50 or more full time employees fails to offer minimum essential benefit health insurance for employee and their dependents.  The legislation makes no distinction between State Based Marketplaces and Federally-Facilitated Marketplaces.

Here is what the law says: Section 4980H,  (a) Large Employers Not Offering Health Coverage addresses the penalties that apply if an employer in this category fails to offer minimum essential l benefit insurance to its full time employees and their dependents.  The employer is assessed a fine IF: (1) the large employer fails to offer minimum essential benefits insurance, and (2) at least one full-time employee of the applicable large employer has been certified to as having enrolled for such month in a qualified health plan with respect to an applicable premium tax credit or cost-sharing reduction is allowed or paid to the employee.  Then the employer is assessed a fine equal to the total amount of premium tax credit plus any cost reduction payment multiplied by the number of the employer's full-time employees during that month. There are special rules that provide exemptions concerning seasonal workers. 

Similarly, the ACA makes no distinction between State-Based Marketplaces and the Federally-Facilitated Marketplace with respect to payment of the Premium Tax Credits and Cost-Sharing Reduction programs. The condition of whether a penalty applies is determined by the employer's size and its failure to provide insurance as required by the law. 

Carolyn Bird Replied November 06, 2013, 9:20 PM EST
Please read the following article:

My question was inspired in part by this article.  I'm sure you'll see its relevance.
The Question Asker Replied November 07, 2013, 1:19 PM EST
Thanks for sending the article. If the Federally-Facilitated Marketplaces were to be excluded from offering the subsidies it would have been stated in Sec. 1321 and in Sec. 1311 PROCEDURES FOR DETERMINING ELIGIBILITY FOR EXCHANGE PARTICIPATION, PREMIUM TAX CREDITS AND REDUCED COST-SHARING, AND INDIVIDUAL RESPONSIBILITY EXEMPTIONS.  North Carolina is one of the states participating in the Federally-Faciitated Marketplace (note is is "facilitated" and not "owned") and qualified individuals residing in North Carolina have been receiving the affordability subsidies. 
Carolyn Bird Replied November 07, 2013, 3:15 PM EST
Since I am a retired educator and farmer and have no training in law (other than contract law), I am content to leave the final decision on this issue to the US judicial system.  According to the article I sent you, Section 1311 specifically names exchanges created by the states and omits Federally-Facilitated exchanges (renamed Marketplaces by the administration). Some have argued that the Federally-Facilitated exchanges are excluded by virtue of having been omitted from Section 1311 while the state exchanges were included.  Sounds logical to me... but, again, I am not a lawyer. As the article explained, the presiding judge stated that both sides have compelling arguments, but he refused to block the administration's choice of including Federally-Facilitated exchanges while he arrives at a decision in February, 2014.  I have not been very effective in predicting Supreme Court decisions as many seem to fly in the face of logic to me.  Example, to this ignorant observer, Justice John Roberts has apparently ushered in a new era of taxation where the government taxes citizens for what we don't do (fail to purchase health insurance for example) rather than tax what we do (buy products, own property, earn income, etc.).  Application of this concept would allow Congress to solve the unemployment problem by taxing businesses for NOT hiring more workers.  In any case, I think that this issue will not be settled until the courts (possibly, the US Supreme Court) has come to final decision.
The Question Asker Replied November 07, 2013, 7:26 PM EST
Certainly it is reasonable to wait for the court decision.  There are nearly a thousand pages of text that constitute the combined law referred to as "The Affordable Care Act," and most of us are not able to know the minds of the court. 
Carolyn Bird Replied November 08, 2013, 2:24 PM EST

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