|The United States Supreme Court decided today in King v. Burwell that subsidies could be offered in States with federally-facilitated insurance exchanges, including the State of Indiana. The Supreme Court concluded that the statutory language limiting the availability of subsidies only to insurance exchanges “established by the State” must be read in the context of the entire Affordable Care Act.The availability of subsidies is directly tied to the employer penalties imposed by the ACA. The ACA employer penalties are only applicable if a full-time employee of a large employer receives a subsidy though an insurance exchange. If the Supreme Court would have reached a different conclusion today, the 30 hour rule and the employer penalties would effectively be eliminated in Indiana.The thirty-nine Indiana public schools that filed suit against the Internal Revenue Service in 2013 regarding the ACA employer penalties will continue to pursue their claims through the federal court. However, today is not a good day for Indiana public schools. At least for the foreseeable future, Indiana public schools will see no relief from the 30 hour rule and the draconian financial penalties that are quickly approaching in 2016.|
In addition to this significant case, the U.S. Supreme Court also ruled today that the Fair Housing Act encompasses claims of unintentional discrimination through disparate impact. This ruling does not preclude the Office of Civil Rights (OCR) of the United States Department of Education from investigating and remedying disparate impact effects on students. Disparate impact investigations and consent decrees have been an increasing priority of OCR within the last two year. However, whether the OCR has that authority is still an open issue under Title VI.
In addition, the Court is expected to rule soon on the constitutionality of statutes limiting marriage to heterosexuals.
Watch for more updates from Bose McKinney & Evans soon on these decisions.
Following is the text from the news release issued by the Indiana Attorney General’s Office regarding
King v. Burwell.
FOR IMMEDIATE RELEASE: Thursday June 25, 2015
U.S. Supreme Court issues decision on employer mandate, tax credits
AG’s Office will confer with state government clients on next steps after ACA ruling
INDIANAPOLIS – Today’s ruling by the United States Supreme Court in the King v. Burwell case will allow IRS tax credits for insurance enrollees under the Affordable Care Act to continue. The Supreme Court’s decision ruling will help answer some but not all of the issues in a separate lawsuit that state government and 39 public school corporations filed against the IRS. The U.S. Supreme Court today ruled 6-3 in King v. Burwell that the Internal Revenue Service was within its legal authority to interpret the Affordable Care Act as it did. Despite the wording of the statute that appeared to limit ACA tax credit subsidies and employer-mandate tax penalties only to the states that operate insurance-purchasing exchanges, the Supreme Court held that the IRS can apply them in 34 states such as Indiana that opted against establishing exchanges, where instead the federal government operates one.
“Our State’s aim has never been to cancel IRS tax credit subsidies for our citizens. But it is vitally important to ensure the national health care system is based on a firm legal and constitutional foundation,” Indiana Attorney General Greg Zoeller said.
“Whether the IRS exceeded the authority Congress granted was a significant legal question that only the Supreme Court could answer with finality. The Court has ruled the ACA will be interpreted to allow IRS tax credits – and consequently, the tax penalties of the employer mandate – even in states that do not operate their own exchanges. Though many will disagree with this outcome given the plain text of the statute, we all must respect the Court’s ruling,” added Indiana Solicitor General Thomas M. Fisher, who is assigned the State’s lawsuit against the IRS.
The Attorney General’s Office is reviewing today’s Supreme Court ruling and will confer with its clients in the executive branch and the State Personnel Department as to the impact of the King v. Burwell ruling on state government.
Hoosiers who enrolled for health insurance using www.healthcare.gov and have questions about their coverage and tax credit subsidies should contact their insurance carrier directly and contact their Members of Congress.
The Attorney General’s Office represents state government in a different lawsuit, State of Indiana et al. v. IRS; it does not represent private employers or private individuals. Thirty-nine public school corporations who are co-plaintiffs with the State in that lawsuit are represented by a private law firm, Bose McKinney & Evans LLP. In their suit against the IRS and in their joint amicus brief separately filed in the King case, Indiana and the schools did not ask the courts to cancel private insurance policies obtained with tax credit subsidies and did not ask for repayment of subsidies already received. The State does not seek to deny Hoosiers tax credits that were, after all, subsidized through federal taxes that taxpayers already paid. Instead, the complaint and amicus brief both noted the ACA employer mandate would be a direct tax on the State and its political subdivisions, in violation of intergovernmental tax immunity.
In the pending lawsuit that the State and 39 school corporations filed against the IRS in the U.S. District Court for the Southern District of Indiana, the petitioners contend the IRS exceeded its authority in seeking to impose the employer-mandate tax penalties of the Affordable Care Act onto government employers, such as state government and public schools. If even one part-time employee in the government entity were misclassified for benefits under the 30-hours-per-week rule, then the employer would face an IRS tax penalty of $2,000 per employee for every worker in the organization. For state government with approximately 28,000 executive branch employees, such a tax penalty if triggered would be approximately $56 million that the State would have to pay the IRS. The 39 public school corporations meanwhile rely heavily on part-time staff – such as bus drivers, cafeteria workers, substitute teachers and coaches – and the employer mandate tax penalty would be especially burdensome on them. The State et al. v. IRS plaintiffs contend such employer mandate tax penalties would violate intergovernmental tax immunity and that such penalties cannot be imposed upon government employers, irrespective of whether they could be applied to private-sector employers.
“In 2013, we were forced to reduce the hours of 25 instructional aides, 10 cafeteria workers and 10 custodians to less than 30 hours of service per week to avoid significant financial penalties,” said Dr. Rod Gardin, superintendent of East Porter County School Corporation that is one of the 39 school plaintiffs. “We are disappointed with the decision released today by the United States Supreme Court in King v. Burwell, which offers no relief from the financial penalties imposed by the ACA that prompted the staffing restrictions imposed by employers throughout the country. Nevertheless, we will continue to move forward in partnership with Attorney General Zoeller to achieve an appropriate remedy. We also respectfully appeal to the United States Congress to act now to implement common-sense solution to the 30-hour rule,” Gardin said.
Last October 9, the State et al. v. IRS case was argued before U.S. District Court Judge William Lawrence, but the case has been stayed since then pending today’s Supreme Court ruling in King v. Burwell, which will impact which portions of the Indiana case can move forward. In light of today’s ruling, the Attorney General’s Office plans to ask the U.S. District Court to schedule State et al. v. IRS case for additional proceedings. Zoeller emphasized that even though the Supreme Court held IRS tax credit subsidies in non-state-operated exchange states to be permissible for private-sector employers and their employees, there still is an unresolved question whether government employers can be subject to tax penalties in violation of intergovernmental tax immunity. It’s a question Zoeller said he hopes the U.S. District Court will address in light of the potential for multimillion-dollar tax penalties on the State and other government employers if even one of their employees were to be misclassified for benefits. The State and 39 schools were not parties in the King v. Burwell case.
“The Court’s decision does not address the question that Indiana has raised, whether state government is to be treated as a taxable entity subject to the IRS regulations of the employer mandate,” Zoeller added.
NOTE: To download a video of Attorney General Zoeller’s comments, visit this link: https://youtu.be/hYXbk04JtxE.