The Affordable Care Act (or ACA) has been a source of controversy and confusion ever since it was created and enacted under the Obama administration. Unfortunately, that controversy and confusion has not dissipated over time.
On the heels of an important court ruling last month, we thought this would be a good opportunity to report on where the ACA is . . . and where it might possibly be headed.
In the middle of December, U.S. District Court Judge Reed O’Connor issued a ruling determining that the ACA was unconstitutional and should be terminated. However, that does NOT mean the ACA is going away any time soon. That’s because the ruling has been appealed, and more than likely, the issue will travel all the way to the U.S. Supreme Court.
So what happens in the meantime? The ACA is still the “law of the land,” meaning that employers must still comply with its mandates. However, that begs another question: what are its mandates?
- The ACA applies to employers that are deemed to be “applicable large employers” or ALEs.
- Whether or not an employer is an ALE depends on how many full-time employees work for that employer during a calendar year.
- Under the ACA, a full-time employee works 30 hours or more per week and 50 full-time workers qualifies an employer as an ALE.
- Part-time workers’ hours are combined to determine how many full-time employees those part-time workers equal. For example, two part-time employees working 15 hours per week equal one full-time employee.
- An employer’s ALE status for a tax year is dependent upon the number of employees it had in the previous year. For example, if the organization employed more than 50 full-time employees (or full-time equivalent employees) last year, then that organization would be considered an ALE for the 2019 tax year.
- Once an employer qualifies as an ALE, it must offer health insurance to its employees that meets a minimum standard. The ACA determines that minimum standard.
- An ALE that doesn’t offer health insurance to its employees that meets the ACA’s minimum standard may be required to pay a penalty.
Now this is where things get a little tricky. The ACA originally contained an individual mandate that if you were an employee and you could afford to pay for health insurance but you did not do so, then you had to pay a fee called the Shared Responsibility Payment.
In 2012, the Supreme Court ruled that the individual mandate is only constitutional when viewed as a tax on citizens. However, the individual mandate and the Shared Responsibility Payment was eliminated as part of tax code revisions starting with the tax year 2019.
So this means a couple of things:
- If you’re a worker or employee to whom the individual mandate has applied to this point, that mandate (and the Shared Responsibility Payment) no longer applies.
- There is a chance that since the individual mandate is no longer applicable, then the ACA as a whole will be struck down as unconstitutional by the Supreme Court.
But will that actually happen? At this point, nobody knows.
In the meantime, if you’re an employer, then the employer mandates of the ACA still apply. If you’re an employee, then the individual mandate applies for tax year 2018, but does not apply for tax year 2019.
Stay tuned for further developments regarding the ACA and how these developments will impact the employment marketplace.
(Editor’s note: This article is intended for informational purposes only and should NOT in any way be construed as legal advice. If you have questions, consult your legal counsel.)