The case of King v. Burwell was based on an interpretation of the premium tax credits associated with the implementation of the Affordable Care Act. The suit claimed that only people participating in the state-run health care exchanges qualified for the tax credits according to the new health care statutes. Upon review by the United States Supreme Court, that claim and subsequent petition were rejected with the reason being that the case's understanding of the requirements for the premium tax credits was incorrect and the statute could stand as it is.
The King v. Burwell Decision and the Affordable Care Act
The Affordable Care Act allows individuals and families to enroll in health coverage either through federal or state exchanges, depending on what a specific state has chosen. Some individuals qualify for a premium tax credit if they purchase their health insurance through an exchange if their employer does not offer an insurance option and they meet certain income and tax filing criteria.
As an individual mandate, the Affordable Care Act is boon for employees with limited access to healthcare, but there are possible financial implications for the employer.
Employers who do not offer an employee healthcare can leave them open to a different type of financial responsibility. Employees who qualify for a premium tax credit, in turn qualify their employers for a provision called the Employer Shared Responsibility.
This provision requires employers who have employees who qualify for the premium tax credits, and subsequently do not offer their own healthcare alternative, to share in the financial responsibility of paying for the insurance of the employee(s) in question.
Tax Credit Criteria
For employees
In order to obtain a premium tax credit, very specific criteria must be met. All of the following requirements are needed to qualify for a premium tax credit:
- Health insurance must be purchased through the Federal or State Exchange
- Minimal, affordable health insurance is not offered through an employer
- Do not file tax returns under a Married Filing Separately form (unless special circumstances allow this)
- Employee is not a dependent on another person's tax return
For employers
The premium tax credits affect employers by requiring their participation in the Employer Shared Responsibility Provision. An employer is required to participate in this provision if:
- The employer employs at least 50 full-time employees or the equivalent counting both full and part-time workers
- The employer chooses not to offer a health insurance option that meets at least minimum coverage requirements and/or is affordable to employees
- At least one employee qualifies for a premium tax credit
Tax Reporting Requirements
Healthcare regulations require that an employer report the health coverage of each employee each year. This involves divulging records of coverage offered and proof that minimum coverage standards are met. All employee coverage records are subject to these regulations, including full-time, part-time, seasonal, and any employee that worked for any period during that calendar year even if they are no longer employed by the company.