One of the driving forces of “Obamacare” or the ACA is that of financial penalties- for employers and individuals who choose to go without health coverage.

There are 4 categories of individuals who will be deeply affected.

1) Employees

The majority of Americans enjoy healthcare benefits from their employers.  However, with premiums rising, if tax benefits and incentives are removed, it is highly likely that fewer employers will continue covering their staff.

Kelly Fristoe, President and CEO of employee benefit brokerage Financial Partners in Wichita Falls, Kelly Fristoe confirms that if the employer mandate penalty isn’t  triggered by an employee receiving a tax credit, large employers who would rather not spend money on offering a health plan could drop it.  Employees will find themselves without coverage and will have to scramble to find the money and a plan they can afford.

2) Employers

Under the issue before the Supreme Court, employers with staff in states providing federally facilitated marketplaces would no longer be held accountable to the employer mandate because the penalty is triggered by federal premium assistance subsidies to full-time employees.

According to James Napoli,  partner in the law firm Seyfarth Shaw. “Simply stated, no receipt of a federal subsidy by an employee means no employer penalty triggered by that employee.”

Steve Friedman, co-chair of the employee benefits practice at law firm Littler Mendelson. points out that:
“If a person can’t get coverage from the health care exchange and receive a government subsidy, then the government is not allowed to tax the employer.”

“The government can only tax the employer [enforce penalties] if the employee who is not offered affordable coverage can go to the exchange and get a tax subsidy.”


3) Insurers

If the Supreme Court , invalidates tax credits for individuals purchasing insurance on the federal exchange,siding with the plaintiffs,  “the individual insurance market would spiral out of control in states that have chosen not to establish their own exchange,” according to Towers Watson’s Barkett.

Marcy Buckner, senior director of state affairs for the National Association of Health Underwriters points out that a mass exodus would occur from the health marketplace if no federal fix exists.  Health insurance plans sold on the federal exchange would become too expensive for many consumers”.

The number of uninsured Americans would increase by 8.2 million, according to the Urban Institute, and premiums would skyrocket, increasing between 122% and 774%, depending on the state, according to Washington-based consultancy Avalere Health.

Health insurers stand to lose customers if the Supreme Court rules in favor of the plaintiff — and carriers will be forced to raise premiums on those that remain.

America’s Health Insurance Plans, a trade association representing the health insurance industry, writes:

“If the shared responsibility requirement and premium tax credits did not work hand-in-hand with the market reforms, the ACA’s reforms would lead to unstable markets with fewer affordable options for individual health insurance in the 34 states with federally-facilitated exchanges than what was available before enactment of the ACA. In other words, the effect of the ACA in these states would not be to increase insurance availability or to leave insurance availability the same, but rather to make the situation worse than it was before Congress acted.”

Healthy people would choose to waive coverage and instead pay the penalty under the ACA. That means that premiums on the remaining customers — most of which would be higher-risk, would skyrocket.

“Left unaddressed, adverse selection will destabilize insurance markets in an adverse-selection ‘death spiral.’ When healthy individuals opt out of the individual insurance market, those who are left are, on average, less healthy (and therefore prone to higher-than-average medical expenses). A sicker pool of consumers results in higher premiums, which causes an additional relatively healthy subset of participants to drop out, which in turn results in a further increase in premiums,” AHIP writes.

4) Hospitals and providers

Both hospital and healthcare providers have supported the government’s contention that the ACA was intended to provide premium tax credits for individuals.

Barkett says barring any sort of fix from Congress or the White House, the future of health care could look drastically different from one state to the next.

“You could have drastically different markets within neighboring states. For example, he says, “Minnesota could have an uninsured rate of 5%, while Wisconsin’s is 15%. That could also have major health outcome implications, state budget implications, etc.,” he says.


The Obama administration lacks a “Plan B”  should the subsides be ruled illegal.

Republican House members on Tuesday unveiled a fix that would give tax credits to people so that they could afford health coverage  and giving aid to those losing subsidies while rolling back the ACA mandates to buy insurance.


The ACA and exchanges were initiated to keep insurance premiums in check.  However, my insurance premium went up 20% within a few weeks of the ACA taking effect as have many other insurance policies.

Should insurance companies be made to benefit by only a certain percentage the way healthcare providers are?

What is your opinion?  Please share your view in the comment box below.