is now 
Now that arguments have been made before U.S. Supreme Court justices in the battle over the legality of Obamacare-related public subsidies (King v Burwell), predictions about the impact of their decision are taking shape. The nation’s highest court is requested to determine whether federal subsidies to help pay for health care coverage can be legally issued in the 36 states that did not form exchanges offering health insurance.
The Court’s decision is expected in late June. If it rules in favor of the federal government’s Affordable Care Act mandates, it will become more entrenched into law and states will be required to take action to set up state exchanges. If the court rules in favor of the plaintiffs, the law’s operating foundation for keeping insurance affordable may be negated, thereby basically shutting down the national health care insurance program.
Currently, government numbers show 7 million people have requested the subsidies in order to pay for part or all of their health insurance premiums. Without the subsidies, many in this group may be forced to opt out of buying health insurance altogether and will claim the “hardship exemption“. They would, in effect, be returning to the same status they had (no health insurance coverage) before the Affordable Care Act was available.
The more people who use the hardship exemption, the weaker the participation rate; resulting in higher premium costs for those who are insured via the exchanges. Insurance companies say because they must offer insurance to everyone, that scenario may mean predominantly sick people will buy health insurance on the exchanges, causing everyone’s rates to rise. Higher rates may cause more people to drop out of the exchanges and so on.
For the 36 states that have not set up their own exchanges, a ruling for the government means they will have to create exchanges in order for their residents to receive federal subsidies. Many states already tried to create the exchanges when the ACA was first enacted, but were plagued by operational and technological problems as well as funding needs they considered unsustainable.
Officials on both sides of the issue predict it would be several years before the exchanges could be operational, leaving a long-term coverage gap and causing more rate hikes that could challenge the ACA’s viability nationally.
The actual cost to individuals of the Affordable Care Act is constantly adjusting as many Americans are signing up through those exchanges that do exist in their states because of deadline pressures as shown in a recent analysis by Forbes business magazine.
Congressional action remains stalled with Democrats wanting to strengthen some mandates of the law while some Republicans are fighting to repeal or defund it and implement an as-yet-to-be-detailed alternative system. Either way, the decision this June will have historical significance.
Meanwhile, regarding this tax season and your 2014 individual income tax returns, the law requires you and everyone reported on your return to confirm you have health care coverage or qualify for an exemption. Otherwise, the IRS will collect a “payment” from you (which most regard as a tax) as mandated by the Individual Shared Responsibility Provision.
If you have any questions about how the Affordable Care Act is affecting you or your business, please contact us at McRuer CPAs online or call us at 816.741.7882 and one of our tax experts can help you.
